A record-setting year for Westchester's office market

Real Estate Weekly, Feb 21, 2001

Buoyed by a vibrant and growing regional economy, the Westchester county office market saw unprecedented activity and tremendous expansion in the year 2000, according to the Insignia/ESG Commercial Market Report.

In total, leasing velocity over the past 12 months reached an all-time high of 3.3 million SF, while absorption totaled approximately 1.1 million SF and the availability rate dipped to 11.6%. According to Dean J. Shapiro, executive director of Insignia/ESG's Westchester-Connecticut office, nearly a third of all leasing in Westchester last year involved expansions by local businesses. Small and mid-sized companies throughout the county also saw rapid growth during the year. "The county is also benefiting, notably, from the restriction -- and expense -- of space in New York City and Fairfield County, Conn. Tenants who may not have considered Westchester before have now set their sites on it because of its affordability and the availability of high quality space. And, because the situation in these neighboring markets could conceivably continue well into the future, Westchester should further improve in 2001."

Approximately 3.3 million SF of space was leased countywide in 2000, a record high for the county and a 17% increase from 1999's record-setting total of 2.8 million SF. The central business district of the City of White Plains and the Westchester East office corridors were the county's hottest leasing areas in 2000 -- 64% of the total space leased countywide took place in these markets, as did six of the top ten lease transactions of the year. Four of Westchester's five submarkets posted gains in leasing from the year before, with the Westchester East submarket reporting the most improvement -- a 34% increase in velocity to 1.1 million SF.

Reflecting an overall strengthening of the local economy, the county's results saw a significant increase in larger lease transactions in 2000. In fact, the average new lease this year totaled 8,204 SF -- 13% higher than 1999's average size transaction. In addition, 1.7 million SF of leases in 41 transactions of 20,000 SF or larger took place during the year. In 1999, 1.3 million SF in only 30 transactions were completed in that same category.

The ten largest lease transactions of the year were Starwood Hotels & Resorts Worldwide's 203, 110 SF at 1129 Westchester Ave. in White Plains; Metromedia Fiber Network Inc.'s 79,650 SF at 360 Hamilton Ave. in White Plains; New York Power Authority's 64,810 SF at 440 Hamilton Ave. in White Plains; Heineken USA, Inc.'s 63,440 SF at 360 Hamilton Ave. in White Plains; Wilson, Elser, Moskowitz, et al's 57,990 SF at 3 Gannett Drive in White Plains; Northern Telecom's 57,460 SF at 200 Summit Lake Drive in Valhalla; TradeOut.com's 56,870 SF at 100 Summit Lake Drive in Valhalla; CIGNA Corporation's 56,150 SF at 120 White Plains Road in Tarrytown; Berkeley Educational School's 52,000 SF at 99 Church St. in White Plains, and Nextel of New York, Inc.'s 50,170 SF at 565 Taxter Road in Elmsford.

For the second straight year, net absorption in Westchester not only remained positive but continued strong in 2000. In total, approximately 1.1 million SF of space were absorbed during the year, bringing the total amount of positive absorption in the county for the past two years to more than 2.3 million SF. Three of the five submarkets posted gains in absorption from 1999, with downtown White Plains reporting the highest total -- 506,210 SF, a 9% gain from 1999. The county's absorption achievement for this year, however was a slight decline from the 1.2 million SF absorbed in 1999. Several large blocks of space returned to the market during the year, most notably 93,550 SF by Prodigy at 44 S. Broadway in White Plains and 101,450 SF by Prudential at 200 Summit Lake Drive in Valhalla, contributed to this result. The fourth quarter of the year was especially affected by these returns -- only 49,000 SF of space was absorbed countywide during that time, compared to an average of more than 300,000 SF absorbed in each of the previous three quarters.

At the end of 2000, approximately 3.9 million SF of space remained available in the county -- 21%, or more than 1 million SF, less than at the same time a year ago. More significantly, larger blocks of space that traditionally were a challenge to lease saw the lion's share of the supply reduction -- 15 blocks of available space of more than 50,000 SF were available as of December 31st, down from 23 blocks a year ago in that same size range. Only six blocks of space measuring 100,000 SF or more remained available at the end of this year, down from nine blocks a year ago.

The Insignia/ESG Commercial Market Report surveyed 284 multi-tenant, class "A" and "B" buildings in Westchester county. Government-owned and occupied buildings, medical office buildings, and buildings containing less than 20,000 SF were excluded.