Area industrial market vacancies reflect national trends.

The national industrial market vacancy has steadily improved over the past three years driven by strong economic growth and has proven to be less cyclical than the office sector. This is due, in part, to a large owner occupied component, which flattens the cyclical fluctuations that are commonly found in the office market and because of the shorter construction time required for industrial development that allows supply to closely mirror demand. According to GB Richard Ellis, the national industrial market, which encompasses three building types: warehouse/distribution, manufacturing and research & development buildings has continued to experience a decline in the overall availability rate and rising rental rates despite new supply being added to the inventory throughout the country. According to Torto Wheaton Research, a subsidiary of GB Richard Ellis, the industrial availability rate nationwide has experienced an overall decline of 30 basis points since year end 1999, despite the impact of new construction , and currently stands at 7.8%.

Each of the industrial building types has also performed well in 2000. The R&D segment has had the greatest decrease in availability, of nearly 100 basis points, to a current level of 7.8%. The tight office market and resulting rent spikes have prompted many traditional office users to explore more cost effective space alternatives in R&D buildings. The availability rate among warehouse and distribution properties has remained constant despite increased demand generated by the wholesale and retail trade employment sectors. This increase in demand has been offset by new construction, with over 34 million SF being added to the supply in the first half of 2000. Availability rates in the manufacturing sector have increased slightly over the past two quarters but are still the lowest of the three sectors at 4.9%.

Tri-State Area Office Market Update

FAIRFIELD COUNTY, CONN.

Fairfield County closed out 3rd quarter 2000 with a vacancy rate of 6.0%, down from 6.2% at year-end 1999. Early in 2000, there was a lack of large blocks of space, particularly in the lower part of the county as a result of a virtual "waiting list" of companies looking to secure these blocks as they come available. This resulted in strong leasing activity statistics but little in the way of absorption. Among the major leases signed in the last six months are: Priceline.com, 131,000 SF at River Park in Norwalk and 125,000 SF at American Center in Greenwich; NeuVis, 60,000 SF at 6 Armstrong Road, Shelton; International Telecommunications Data, 80,452 SF at 9 West Broad Street, Stamford; NAG Reinsurance, 75,000 SF at 70 Seaview Avenue, Stamford; and Mercator, 60,000 SF at 10 Westport Road, Wilton. With four projects poised to come out of the ground in Stamford once a lead tenant is secured, speculative development may be on the horizon. There have only been two significant investment transactions in the past s ix months. Quadrant Partners purchased 1351 Washington Boulevard in Stamford (219,217 SF, $15,010,000), and P.D.J. Realty purchased One Soundshore Drive in Greenwich (58,026 SF, $13,000,000).

The Hartford market strengthened over the first half of 2000, ending with a YTD net absorption of over 200,000 SF resulting in a vacancy rate of 14.7% down from 16.0% at year end 1999. The Class A space in both the City of Hartford and the suburban markets has outperformed the Glass B and C product by a fairly wide margin. Among the major leases in the Hartford market this year are: State of GT (200,000 SF) at Riverview Square, UT Corp (160,000 SF) at 1101 Kennedy Road, and The Hartford Insurance Group (140,000 SF) at 200 Great Pond Road.

HARTFORD COUNTY, CONN.

Major Investment transactions in Hartford County include the UTC's sale of One Carrier Place in Farmington (116,796 SF, $13,900,000) to USRA Farmington, CT and Glastonbury Retail, Inc.'s sale of six retail/office buildings at 140 Glastonbury Road in Glastonbury (104,198 SF, $14,780,000) to Somerset Square LP.

WESTCHESTER COUNTY, N.Y.

Westchester County continues to be a market that is much stronger than the statistics indicate. The 3rd qtr. 2000 vacancy rate stood at 11.0%, a dramatic decrease from the 1999 year-end value of 17.6%. Tenants in the 2,000 to 10,000 SF range still find it increasingly difficult to find available space with an effective vacancy rate of under 8%. Recent large leasing transactions include: Starwood Hotels and Resorts, 212,990 SF at 1129 Westchester Avenue in White Plains; Heineken, 63,400 SF and Metromedia, 79,000 SF, both at 360 Hamilton Avenue in White Plains.

LONG ISLAND, N.Y.

Overall, Long Island continues to strengthen, with a 3rd Qtr. Vacancy rate of 5.9%, a significant decrease from year-end 1999 (7.8%). Similar to other surrounding markets, existing tenant expansions have quickly backfilled vacancies and new/re-developments preserving the low vacancy. A prime example of this trend is the Chase Bank Space in the Jericho Quadrangle. Chase had announced that they would be vacating two blocks of space in May 2000 and May 2001 totaling 600,000 SF. This space never made it to the market having been leased in two transactions to Cablevision. Significant investment transactions include three Lighthouse RE Ventures sales. 25 Newbridge Road in Hicksville and 1101 Stewart Road in Garden City (combined 162,950 SF) for $19,300,000, and 300 Merrick Road (34,415 SF) in Lynbrook sold for $4,530,000. Treeline Companies sold 33 Walt Whitman Road (109,000) in Huntington to Income Star, LLC for $10,500,000. In addition to the Cablevision deals, recent leases include MCI/ Worldcom (127,000 SF) at 60 Charles Lindbergh Blvd. in Mitchel Field, Grawford Industries (62,000 SF, 10 years) at Melville Corporate Center, and Network Peripherals (24,076 SF, 10 years) in Bohemia.

NORTHERN & CENTRAL NEW JERSEY

Both the Northern and Central New Jersey markets ended the 3rd Quarter with vacancy rates under 10%, at 9.2% and 7.18% respectively. The Northern and Central New Jersey market experienced negative net absorption of 762,879 SF at the end of 1st Quarter 2000. This was primarily caused by new construction of 1.3 million SF, which came on line during this period. The 3rd Quarter demonstrated the continued strength of the New Jersey market with 2,862,898 SF of positive net absorption as the demand for space was fueled by New Jersey's vibrant economy.

The average asking lease rates for the Northern and Central New Jersey Office Market continue to rise as rents increased from $23.28 PSF for 3rd Quarter 2000 to $23.43 for 3rd Quarter. The rate has climbed $1.15, or 4.9%, since this time last year when the rate was at $22,28 PSF. The New Jersey market now boasts the highest asking lease rates it has seen in over a decade.

A series of large office leases recently occurred in this region, especially in the Hudson and Morris County sub-markets. The major Hudson County transactions included Wiley & Company's 400,000 SF lease at Waterfront Corporate Center in Hoboken and Knight/Trimark's 266,000 SF lease at 545 Washington Boulevard in Jersey City. Two leases at Gatehall II in Parsippany highlight major Morris County transactions, where Exodus Communications signed a 214,000 SF lease and Key Bank signed a 204,000 SF lease.

The office investment market has remained brisk with numerous deals, highlighted by Mack-Cali as a seller of 95 Christopher Columbus Drive in Jersey City (622,000 SF, $152,500,000), and 412 Mount Kemble Avenue in Morris Township (475,100 SF, $82,700,000) and as the buyer -of Gatehall IV in Parsippany (265,464 SF, $42,150,000) from a partnership of Hines and CalPERS. Other major transactions include the Berwind Properties sale of Continental Plaza in Hackensack (634,146 SF, $78,500,000) to Stellar Mgmt and the sale of the seven-building Lincoln Equities Northern NJ Portfolio (1,661,362 SF, $235,000,000) to a partnership between Investicorp and Grow Family Holdings.