Westchester Office Market Posted Strong Leasing in First Quarter
Real Estate In-Depth | April 2017
WHITE PLAINS—The Westchester office market posted strong leasing activity in the first quarter and the removal of some properties from the inventory helped dramatically reduce the county’s office vacancy rate.
In a recently released report on Westchester and Fairfield County’s office markets, brokerage firm Colliers International Group Inc. reported Westchester exhibited strengthening fundamentals, while neighboring Fairfield County, CT appeared to have lost some of its positive momentum from 2016.
“We saw a tale of two counties during the first quarter,” said Jeffrey Williams, executive managing director | market leader for Colliers International’s Stamford, CT office. “A surge in the repurposing of obsolete office properties in Westchester County had a positive material impact on the market, with a substantial decline in the availability rate and an upward trend in asking rents. Fairfield County, however, stumbled out of the gate to start the year. We saw a softening in asking rental rates and a climb in the availability rate. Almost every Fairfield submarket contributed to this trend.”
The removal of properties from the office inventory heavily affected the availability rate Westchester County’s East I-287 and White Plains CBD submarkets, especially; the entire region saw its rate drop 230 basis points since year-end, to rest at 19.6% at the end of the first quarter.
“Healthy leasing volume also contributed to a healthy quarter,” Williams said. “New York Life’s 178,824-square-foot lease at 44 South Broadway in White Plains—the largest deal year to date—helped boost total office leasing volume 40.0% higher than the trailing five-year quarterly average.” Asking rental rates rose $0.23 per square foot from year-end 2016, to a current $27.19-per-square-foot.
The Colliers report noted that the Northern Westchester submarket had stabilized during the past year, and the trend continued during the first quarter. The office availability rate rose by just 20 basis points, to 24.0%, while asking lease rates appreciated by 3.0% to $25.78-per-square-foot.
Although the Southern submarket lost a significant occupier, Sidney Frank (now Mast-Jägermeister), to the White Plains CBD, its availability rate has ticked down to 14.4% from 15.3% as several smaller tenants took space.
The East I-287 submarket was among the biggest beneficiaries of the commercial property re-purposing trend in the first quarter. Healthy office leasing activity also contributed to the availability rate dropping 280 basis points quarter over quarter, settling at 17.6%.
Leasing activity in the West I-287 beat its trailing five-year quarterly average by 24.1%, Colliers reported, but there was enough newly available space that came online this quarter to push the availability rate up slightly by 70 basis points, to 23.2%.
The White Plains CBD experienced a major improvement in the first quarter, driven by adaptive reuse and robust leasing activity. The office availability rate improved by 690 basis points from last quarter, to 18.7%—the lowest rate since 2006.
Fairfield County posted nearly 1.1 million square feet in transactions in the first three months of 2017. Overall office leasing activity in Fairfield County was nearly double the first-quarter 2016 volume, however, approximately 60% of the activity involved renewals, including the two largest first-quarter leases. In Shelton, Prudential Annuities recommitted to 197,610 square feet at 1 Corporate Drive, while in Stratford, Yale New Haven Hospital renewed for 100,968 square feet at 99 Hawley Lane.
“Additionally, newly available space, particularly at a couple of large office buildings, further dampened the positive momentum felt last year,” noted Sean Cullen, director of research for Colliers’ Stamford office. “By the end of March, the availability rate rested at 24.5%, 220 basis points over year-end 2016, and the average asking rent of $35.23-per square foot reflected a $0.48 per-square-foot decline.”
The Eastern submarket achieved its highest office leasing total in more than 10 years. Yet newly available blocks contributed both to the availability rate rising 280 basis points quarter-over-quarter, to 18.4%.
The Central submarket average asking lease rates fell by almost 7.0% during the first quarter, with the addition of newly available, lower-priced product. The availability rate has increased 100 basis points, to 25.1%.
Despite healthy leasing, the Greenwich submarket’s office availability rate climbed 510 basis points quarter over quarter, settling at 23.9%. Much of the new space can be attributed to just three occupiers, Colliers stated.
The impact of Starwood’s acquisition by Marriott is being felt in Stamford CBD. With much of Starwood’s former headquarters now offered for sublease, the CBD’s availability rate rose 330 basis points this quarter, to 32.7%. The Stamford Non-CBD performed better, becoming the only Fairfield County submarket to experience a decline in its availability rate, which fell 70 basis points to 25.1%.
The Northern submarket remained quiet during the first quarter, with the office availability rate climbing just 50 basis points, to 17.3%. The impending resolution of foreclosure proceedings at the 1.4 million-square-foot Matrix Corporate Center will likely have an oversized effect on the submarket moving forward, Colliers noted.