C&W report shows steady improvement in Westchester office market.

Cushman & Wakefield released second quarter statistics for the Westchester County office market that indicate the county continued to show taking steady improvement. Activity was comprised of companies of-every size taking advantage of market conditions to secure new space, recast leases and even expand.

Overall available space dropped by 500,000 SF, causing the overall vacancy rate to decrease 1.5% points, from the first quarter 2003 to 16.9%.

Submarkets demonstrating improvement include the White Plains Non-CBD and the Central submarket. In the White Plains Non-CBD the direct vacancy rate stayed level at 18.4%, but the overall vacancy dropped from 22.9% in the first-quarter to 21.7% in the second quarter, indicating sublease space was preferred, over direct transactions. This is attributed to better economic terms achievable on subleases as companies work to unload surplus space.

The Central submarket had the greatest decrease in overall vacancy from a first quarter total of 20.8% to 13.0% in the second quarter, a decrease of 7.8% points -- due to the purchase of the Rockwood Road facility in Mount Pleasant for $38.3 million by New York Life Insurance. The 383,000 SF building, previously vacant and owned by The Gale Company, accounted for 32.3% of the overall space available in the Central submarket.

As there was a limited addition of available space to the Westchester County market, leasing activity had a chance to "catch up" and absorb some of the existing space. Three major leases were signed during the quarter including: Oxford Health Plans at 44 South Broadway in White-Plains for 57,023 SF; Affiliated Computer Services-State and Local Solutions, Inc. (ACS) at 777 Old Saw Mill River Road in Tarrytown, renewed their lease and expanded from 35,109 SF to 64,679 SF; and Kraft Foods Federal Credit Union, which will occupy 28,538 SF at 2 Manhattanville Road in Purchase.

Leasing activity year-to-date was 780,836 SF, slightly ahead- of last year's pace. Net absorption was a positive 195,594 for the county in the second quarter and a positive 227,249 year-to-date.

"The steady increase in leasing activity and number of transactions executed demonstrates how desirable Westchester County has become to tenants," said Michael B. Gordon, director, business development for C&W's offices in White Plains and Stamford (which cover the Westchester County market). "Large leases were signed in both the CBD and Non CBD markets."

Direct average rental rates for the county remained steady through the first half of 2003. The direct average asking rent for the first quarter was $29.05 per SF. In the second quarter the number dropped to $28.80 per SF. While asking rental rates were in the upper $20s, taking rents often were 10 to 15% lower as landlords aggressively sought to secure creditworthy tenants.

Investment sales continue to improve with a high demand for commercial real estate acquisitions, due to an abundance of capital and equity on the institutional levels.