Fairfield and Westchester markets relatively stable.

Fueled by relocation and expansion activity in the area, Connecticut's Fairfield County and New York's Westchester County office markets remained relatively stable over the past few months. The improving economic picture encouraged corporate growth and decision-making during the first quarter of year, though at a slower pace than in previous quarter.

Fairfield County

Fairfield, especially, saw continued strength from the Western submarket and me City of Norwalk in particular.

In 2003, Norwalk saw four of Fairfield County's ten largest transactions as companies took advantage of flexible ownership, and quality product at reasonable rates. 2004 has thus far seen a continuation or Norwalk's popularity.

Fairfield County's most significant transaction of the year so far was also the largest lease in the county since 1999--Diageo PLC (NYSE: DEO), a global beverage company, leased the entire southern tower of Building and Land Technology's Glover Avenue office campus for use as its US headquarters.

When completed in early 2005, the new headquarters will total 277,700 square feet in a seven-story, state-of-the-art office tower. In addition, FactSet Research Systems will expand and consolidate its operations to 129,095 square feet of office space at nearby 601 Merritt 7.

These two companies join GE Commercial Finance, Graham Capital Management and Tauck World Discovery--firms that made major commitments to Norwalk last year.

The activity in Norwalk has been so encouraging recently, in fact, that Building and Land Technology has started construction on a third Glover Avenue building--on a speculative basis.

While these transactions have benefited Norwalk, they are also evidence that the movement of companies away from Lower Fairfield County that began last year appears to be continuing into 2004.

While Greenwich remains a "hot-spot" for hedge funds and financial corporations, companies that do not need the prestige of a Greenwich address are migrating to Norwalk and locations farther east like Shelton to take advantage of more favorable economies.

Unilever, for example, plans to close its Greenwich facility in 2005 and relocate operations to two buildings totaling 122,000 square feet in Trumbuli.

Stamford's difficulties also appear to be continuing as the slow economic recovery and lack of job growth translates into little demand.

Space returns have stabilized in the city, however--a positive sign once the pace of the upswing accelerates--and several significant retail transactions will pump new life into vacant CBD properties.

Westchester County

After two years of blistering, economy-defying activity, Westchester County seems to be settling into a more economically-parallel pace in 2004.

The legacy of those last two years, however, lives on as relocations into the county continued in the first quarter and many former high availability properties saw their vacancies broken up.

Large transactions, once rather unusual in this small tenant market, remained a significant driver of its outcome.

Foremost among these transactions in the first quarter was Kraft Foods' 79,000-square-foot lease at 120 White Plains Road in Tarrytown, NY. The international food giant will relocate a portion of its workforce from its Rye Brook, NY headquarters to the new space. Nomura Securities will also open a new, 46,000-square-foot office facility at 5 International Drive, also in Rye Brook.

Both of these transactions build on the momentum initiated by Morgan Stanley's purchase of Texaco's 725,000 square foot former headquarters building in Purchase in 2002 and furthered by New York Life's acquisition of the 383,000 square foot Mt. Pleasant Executive Center in Mr. Pleasant last year.

Additional 50,000 to 100,000 square-foot deals are expected to be consummated in Westchester County over the next few months, further eliminating the county's supply of large blocks of available space--a major event for a market where large blocks of challenging availabilities were the norm.

As these large transactions increased, however smaller deals, once the "bread and butter" of Westchester's activity, have significantly dropped off, resulting in less overall velocity compared to last year.