Stormy Economy Caused Minimal Damage in Westchester

STAMFORD, CT-Commercial brokerage firm Insignia/ESG says that, unlike in years past, the slowing economy caused only minimal damage to the office market in Westchester County.

“These results clearly demonstrate Westchester’s new found resilience against the fluctuations of the business cycle,” suggests Dean J. Shapiro, executive director of Insignia/ESG’s Westchester-Connecticut office. “In the past, the corporate retrenchments characteristic of a slower economy would have caused a major downslide in Westchester’s commercial market. That didn’t happen this time around because of the diversity of the tenant base and flexibility of most buildings.”

Though leasing slowed in the first half of this year as compared to the same period in 2000, the volume remained in line with historical norms, Insignia/ESG officials say. Despite the troubled economy, the county’s office availability rose just over three tenths of a percentage point to 13.1% from the same period last year. To show just how stable the county’s office market has been of late, the mid-year 2001 rate was almost flat as compared to the 13.2% rate posted three months ago.

Shapiro says that the 1.5 million sf in leasing activity by mid-year 2001, although 19% less than the 1.8 million feet secured in the first six months of 2000, was still among the highest in terms of leasing volume in Westchester’s history. A total of 64% of the lease deals thus far in 2001 were secured in the second quarter, including Pepsi Bottling Group’s 380,000-sf transaction in Somers. However, the company later decided to put 16,000 sf back on the market at the One Pepsi Way building.

In addition, a number of other large blocks of space were returned recently. This led to the almost 570,780 sf of negative absorption in the first half of 2001.

Insignia/ESG notes that Westchester was not immune to the downturn in the new-economy sector. Firms such as iClick, Insite Services, Monster.com, Entex Services, Lucent Technologies, Metromedia Fiber Network, Learn2.com and Advanced Network each vacated space in 2001. Those vacancies, combined with office downsizing programs instituted by Lockheed Martin in Yonkers (140,000 sf), OnMoney in Purchase (40,000 sf) and the County of Westchester (24,500 sf) caused the complete reversal of last year’s 676,200 sf of positive absorption posted for the first six months of last year. In addition, International Paper vacated its Purchase headquarters (78,560 sf) to relocate to Downtown Stamford, CT.

In Downtown White Plains, despite brisk leasing activity, the return of some space to the market by some cost-cutting companies caused the business district’s availability rate to jump nearly two percentage points from June 2000 to 18.9% at the end of the second quarter 2001.

While availability rates remain relatively stable in the major markets in Westchester, Insignia/ESG officials say that asking rents continue to rise. For the first six months of 2001, asking rents averaged $26.27 per sf, a 6% increase from June 2000′s level and 10% above asking rents from two years ago.