Availability increases in Westchester and Fairfield.

According to the latest market report by Newmark & Company Real Estate, Inc., the office markets in Westchester and Fairfield counties leveled off in the first half of 1999. Vacancies increased, leasing and sales activity slowed, and net absorption was negative.

"Despite rising availability rates, however, rents remained stable, reflecting a market strong enough to withstand the downward pressure exerted by excess supply," said Newmark Executive Managing Director John D. Goodkind.

Rents rose in Fairfield by $0.22 per square foot to $22.28 per square foot, while Westchester rents' experienced a minuscule $0.02 decrease to $22.66 per square foot. Both Fairfield and Westchester counties returned space to the market for a combined total of 606,253 square feet, which brought the availability rates up to 16.8 and 11.6 percent, respectively.

At 218,237 square feet, absorption in Westchester County was negative for the fourth consecutive quarter, largely due to the exceptionally weak performance of the White Plains CBD, where 141, 160 square feet came back onto the market. Countywide rental rates rose $1.09 to $22.66 per square foot however, exceeding the gains made during the first half of 1998.

"Northern Westchester remains the tightest district in the county and was the only one to report positive net absorption and declining availability, "said Goodkind. "The district absorbed 17,503 square feet and had the lowest availability rate, 6 percent, which is significantly lower than the county-wide average of 16.8 percent."

Rents in Northern Westchester declined for the third consecutive quarter., and slipped .08 percent to $19.12 per square foot. Southern Westchester is still the cheapest district, with rents at $16.01 per square foot. The availability rate in Southern Westchester grew to 11.7 percent and the amount of available sublet space increased by 46.1 percent over last quarter.

The Eastern and Western Westchester markets have remained fairly stagnant, this year, returning 36,387 square feet and 35,701 square feet respectively, which marginally increased the availability rates by 0.3 and 0.6 percent. Western Westchester achieved the highest rise in rental rates, climbing 7.2 percent to $21.92 per square foot.

The White Plains CBD, which suffered the largest increase in availability, saw its rate increase to 22.3 percent. The district returned 141,160 square feet to the market, as negative net absorption of 155,015 square feet easily overcame the 13,855 square feet of sublet space absorbed.

As indicated by the increase in availability, leasing activity was sluggish during the second quarter. Nextel Inc.'s 35,000 square-foot deal at 175 Clearbrook Road in Elmsford, and Castle Oil's 35,000 square-foot renewal at 500 Mamaroneck Avenue in Harrison led the way; Alliance Capital followed with its deal of 21,057 square feet at 925 Westchester Avenue in White Plains, and I-Click came in fourth with a deal of 18,270 square feet at 120 Bloomingdale Road (also in White Plains).

It is interesting to note that out of 254,422 square feet of leasing activity in Westchester, 65 percent came from Eastern Westchester and White Plains CBD, the two most expensive districts in the county.

In the Fairfield office market, vacancies rose and net absorption was negative during the first half of 1999, as 388,016 square feet was returned to the market and the availability rate rose one full point to 11.6 percent. While rents remained stable in Fairfield last quarter, the rents in Greenwich, the county's most expensive district, continued to rise.

Significantly, the Fairfield market has reported two consecutive quarters of negative absorption. While this may suggest that the suburban office market is cooling off, it is important to keep in mind that the market continues to exhibit strength, as rents have remained high despite rising availability.

Central Fairfield County suffered a rough quarter, with negative net absorption of 317,234 square feet, which caused the availability rate to climb to 13.7 percent. The overall rental rate fell to $18.28 per square foot. Perhaps the biggest story to emerge from this district concerns th.e sublet submarket, where there was negative net absorption of 197,897 square feet during the last six months, and rents dropped to $22.63 per square foot from $27.78 per square foot in the last quarter.

Another district where the sublet market impacted the overall quarterly standings was in Northern Fairfield. This district's availability rate increased to 2.8 percent. Negative net absorption of 126,776 square feet of sublet space easily overcame the 54,148 square feet of direct space absorbed.

The sublet submarket also affected Greenwich, as 90,398 square feet of space came off the market and positively offset the negative absorption of direct space. In this district, rents soared 10.4 percent during the second quarter to reach $34.35 per square foot, a decade high. The availability rate fell to 7.4 percent from 8.8 percent, with net absorption of 60,875 square feet.

Stamford did not fair as well, as it returned 122,169 square feet to the market due to negative absorption of both direct space and sublet space. Stamford's availability rate increased to 11.2 percent, but the district remained behind Greenwich with the lowest availability rate in the county.

Following last quarter's trend, Fairfield County produced more negative net absorption than Westchester, but ironically, the magnitude of leases signed was greater in Fairfield. The largest deal was Clarence House Imports Ltd.'s 66,000 square-foot lease at 600 West Avenue in Stamford. There were no other deals over 50,000 square feet, as the second largest was Arnica Mutual Insurance Company's deal of 25,000 square feet at One Park Ridge Road in the Berkshire Corporate Park in Bethel.

"The most notable moves on the investment front in the second quarter occurred in Greenwich and Eastern Westchester, the most expensive districts of Westchester and Fairfield counties," said Goodkind. "The largest transaction this quarter was an acquisition by W&M Properties of a well-located, institutional, quality building in Westchester's largest office submarket."

W&M Properties bought the five-story, 285,000 square-foot Class A office building at 500 Mamaroneck Avenue in Harrison, NY for a little over $30 million, and has allocated an additional $12 million for upgrades. The second largest transaction concerns neighboring properties at 440 and 450 Mamaroneck Avenue, which were bought by the Property Reserve, Inc. of Salt Lake City, Utah, for $42.1 million.