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TARRYTOWN, NY-Until New York City’s office market begins to stabilize, the suburban markets of Westchester and Fairfield counties can expect little or no major relocation deals from New York City firms, according to area broker Scott Benson, president of Benson Commercial Realty, Inc.

Benson says that there are currently about 100 New York City office leaseholders occupying space of 100,000 sf or more whose deals are approaching renewal or are set to expire in the near term. He adds that other factors such as limited leasing activity, combined with the more than 45 million sf of direct and sublease space that is now available in Manhattan, have contributed to average asking rents falling by more than $11 per sf in the city.

“These are just some of the reasons the suburban market should anticipate limited, large-block, New York City relocations, for quite some time,” he says. “This conclusion is best proven by the lackluster absorption of large blocks of space in excess of 50,000 sf during the last number of months in both Westchester and Fairfield counties.” Benson also notes that tenants in New York City may decide to stay in the city because they can now get better deals from Manhattan property owners.

“Another major problem that will hinder the velocity and timing of the potential backfilling of our large blocks of vacant space (in excess of 50,000 square feet) in both markets is: New York City owners are presently, once again, extending concessions and increased work letter contributions,” Benson says.

He says that the continued lack of absorption of sublease space will continue to put pressure on the pricing of direct space deals in New York City and the surrounding suburbs.

“I anticipate this to continue through the first quarter of 2003,” he predicts. “This interim shake-up in each of our markets is creating an interesting opportunity for existing tenants with leases in place. This opportunity is the ability of the aforementioned tenants to recast their transactions and lock in long-term leases at favorable rental rates, and in most cases, with work letter contributions and other concessions that were unavailable less than two years ago.”

While saying that large New York City relocation deals will be few and far between for the Westchester-Fairfield market, he contends that Manhattan-based service companies in the 7,500 sf to 25,000 sf range, including money management firms, hedge fund groups and other financial service related concerns, will begin to fill the vacant space in both areas in the near term.

Benson concludes that historically the Westchester and Fairfield office markets generally lag behind New York City by one or two quarters. “In my opinion, the greatest two components which will aid in the expeditious stabilization of occupancy levels and ultimately increase the effectuated rental rates are: the lack of new construction in our region and the ability of New York City’s existing owners to recast their current building financing at interest rates not experienced for decades,” he says.

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