Westchester continues steady road to recovery

Real Estate Weekly, Jan 31, 1996 by Maureen O'Boyle

The White Plains non-CBD remains the only submarket to have negative absorption (405,617 square feet), largely due to the inability of 76 percent of its available square footage to be divided below 20,000 square feet. In turn, 79 percent of White Plains non-CBD Class A space can only be leased by 30 percent of the submarket users, which is impeding recovery.

Leasing activity is at its highest level since the end of 1992, at 1,759,205 square feet, a 3.8 percent increase over the fourth quarter of 1994. The largest lease transaction in 1995 was Oxford Health Plans' commitment to 265,000 square feet at Westchester One in White Plains, negotiated by Cushman & Wakefield. The company claims to be the "nation's fastest-growing" managed-care company and plans to put 1,500 employees in White Plains by the close of 1996.

Overall vacancy rates in Westchester County decreased one percentage point from year-end 1994 to 17.6 percent, 0.4 of a percentage point below third quarter 1995. The Central submarket led the quarterly decline in vacancy rates, decreasing 10.4 percent from the previous quarter to 12.1 percent, the County's lowest submarket overall vacancy rate. The White Plains CBD, which posted the largest lease in the county, Oxford Health Plans, decreased its overall vacancy rate by 4 percentage points from the fourth quarter of 1994, the year's leading decline.

The most interesting vacancy situation appears in the White Plains non-CBD, which had minimal leasing activity over the past year and an increase in the overall vacancy rate by 7 percentage points to 23.1 percent. Although overall vacancy rose substantially, the direction of class A and class B vacancies confirms the difficulty this submarket is having absorbing space. Class A space in the White Plains non-CBD, which contains a bulk of the available space unable to be divided below 20,000 square feet, had an 8.3 percentage point rise in overall vacancy rate. This is the highest Class A vacancy rate in the county.

Economy

According to local economists and business leaders, Westchester County has received mixed reviews about its economic outlook. While some sectors have continued to grow, others have started on a slow decline. The consensus among most economists, therefore, appears to be one of cautious optimism.

Westchester County has experienced its largest job gains in the service sector, particularly health and social service industries. These two sectors increased employment by 12 percent and 11 percent, respectively, between 1989 and 1994, and increased 1.2 percent and 3.1 percent, respectively, over the past year. If Westchester County grows at a pace equal to the national growth rate, these industries will create an additional 38,200 and 27,500 jobs, respectively, by the year 2005. The areas expected to show rapid growth include medical labs, home health care, outpatient services, child day care and residential care.

In 1995, the addition of such companies as Mastercard International and Oxford Health Plans has brightened the employment picture in 3Westchester County by adding 1,500 jobs each. The opening of the one-million square foot mall, The Westchester, in downtown White Plains has contributed to the slight job gains in the retail sector. Also, superstores such as Home Depot, which have been popping up throughout the county, have had a positive affect on the economy.

General Motors' decision to close its Minivan Assembly Plant in North Tarrytown in 1996, however, will eliminate 2,000 manufacturing jobs. The manufacturing sector is expected to continue reducing payrolls through the end of the decade.

Of significant note this year, the Westchester County Airport opened a new terminal after undergoing a $95 million modernization. According to the November 20, 1995 issue of the Westchester County Business Journal, "Airlines operating at the terminal include United, U.S. Air, American, Delta Express, Carnival, Com Air, Downeast and Northwest." With the increasingly global nature of business, airport access factors into companies' location decision. The terminal is expected to better facilitate business travel to the Westchester County area.

New York State's commitment to the aggressive pursuit of corporate tenants could prove effective, especially since Connecticut has re-directed its incentive package away from grants.