C&W Predicts Sharp Drops in Vacancy in '07

Westchester County posted an office vacancy rate of 15.9% at year's end 2006 up 1.4% from year-end 2005, reports James Fagan, senior managing director of Cushman & Wakefield's Fairfield County, Westchester County and Long Island offices. "I think you are going to see that decline precipitously in 2007," he predicts. "The amount of available space on the market in 2007 will decrease by more than one million sf. In Fairfield County, you are going to see the same type of decrease in the vacancy rate and the same amount of absorption."

At a media briefing on the two markets held on Tuesday at the Delmar Greenwich Harbor Hotel in Greenwich, C&W executives predicted rent increases in all major markets in Westchester and Fairfield counties, particularly in the hot markets of White Plains, Greenwich and Stamford.

Fagan and other C&W execs cite tight market conditions in New York City along with escalating rental rates there as factors that could drive some Manhattan firms to the northern suburbs. Fagan says there are 10 larger users each requiring more than 100,000 sf of space that are studying the Westchester/Fairfield markets at the moment, with another 10 users seeking 40,000 sf and under in Westchester County.

C&W notes that while the overall vacancy rate rose somewhat, direct vacancy had a slight increase of 0.2%, indicating that a great portion of the vacancies are sublease space. Sublease space in Westchester totaled approximately 750,000 sf, an increase of 39% from year-end 2005. This jump was largely attributable to the addition of space by Argent Mortgage. While the company is marketing both 209,728 sf at 333 Westchester Ave. and 325,000 sf at Westchester One in White Plains, the mortgage firm will vacate only one location, Fagan says.

Other companies putting space on the market included: Triarc Cos. (52,960 sf), Lillian Vernon (52,652 sf), AOL Movie Phone (30,000 sf) and Bank of New York (29,400 sf).

Both direct and overall vacancy rates in Fairfield County decreased from the same period last year, while overall absorption was a positive 466,540 sf. For direct space, the vacancy rate dropped 1.8% from 13.1% to 11.3%, while the sublet space rate dropped 2.2% from 16.9% to 14.7%. Overall, the amount of space available on the market decreased by 13%, C&W statistics reveal.

There were some significant move-outs by the likes of International Paper, MeadWestvaco Corp., and Unilever PLC in 2006 as well as some sufficient growth. Several companies chose to remain in the county, such as UST, which recently announced its relocation from Greenwich to Stamford; Terex Corp., which relocated within Westport, and Citibank, which renewed in Stamford. Recently, Xerox Corp. announced its intention to vacate its Stamford headquarters on Long Ridge Road for a smaller facility in the region.

The Greenwich market will be tested in 2007, Fagan notes, now that thee large tenants: UST, Unilever, and Amaranth Advisors, are vacating large blocks of space totaling more than 300,000 sf. He says that C&W expects that at least one of these available large blocks of space will be committed to prior to the end of the first quarter of 2007.

"Historically the addition of 300,000 sf would have been bad news for the office market," he says. "In today's market, however, owners look at these events as opportunities for new tenants to take space that otherwise would have been unavailable in the super-tight Greenwich office marketplace."