Fairfield witnessing record activity; Westchester still facing challenges.
Despite steady leasing activity, corporate downsizing continued to have negative effects on the Westchester County commercial real estate market, causing an increase in availabilities in the first quarter of 1994.
The county-wide availability rate increased 51 basis points since year-end 1993's 20.75 percent, closing the quarter at 21.26 percent (or 7.05 million square feet of available space). This increase is the direct result of space recently returned to the market. These new availabilities include: 130,000 square feet at 1 North Lexington Avenue in White Plains; 120,669 square feet at 549 Pleasantville Road in Briarcliff, 120,00 square feet at 540 White Plains Road in Tarrytown; 80,000 square feet at 500 Mamaroneck Avenue in Harrison; and 60,000 square feet at 4 Manhattanville Road in Purchase.
The return of space to the market, due to continued corporate downsizing, outpaced leasing activity during the first quarter. As a result, the Westchester County office market experienced 163,665 square feet of negative net absorption.
Leasing activity during the first quarter of 1994 totalled 510,000 square feet, comprised overwhelmingly of transactions smaller than 5,000 square feet. The average transaction size was 3,721 square feet. Overall, leasing velocity for the first quarter of 1994 was 12.48 percent lower than that of the first quarter of 1993.
The Westchester County office market is dominated by relatively small, local tenants. Their continued demand for space is contributing to stabilization in the market - however these small transactions are indicative of a slow market recovery.
The picture for Fairfield County is much brighter. Extraordinarily strong leasing activity. especially among "Class A" properties, resulted in the net absorption of space and a decline in availabilities during the first quarter of 1994.
Leasing velocity across the county during the first quarter of 1994 totalled 1.187 million square feet, surpassing first-quarter 1993's 822,000 square feet in velocity by 44.37 percent. The number of leasing transactions recorded during the first three months of 1994 totalled 209, exceeding the number recorded in each of the four quarters of 1993.
The net effect of this leasing activity was the absorption of 471,107 square feet of space. As a result, Fairfield County's overall availability rate dropped an additional 119 basis points since year-end 1993, closing the quarter at 19.79 percent equal to 7.85 million square feet of available space).
The Central Fairfield market segment had the most leasing activity during the first quarter of 1994, with 62 separate transactions totalling 392,827 square feet. The Stamford Central Business District (CBD) was close behind with 49 leasing transactions totalling 264,797 square feet of space,
In terms of transaction size, the average transaction was for 5,681 square feet of space, a significant increase over the 4,737 square feet average size charted at year-end 1993. Overall, the majority of transactions (150) were for less than 5,000 square feet of space last quarter. Just three transactions were recorded greater than 50,000 square feet in size.
Leasing activity within "Class B" properties has been consistent, averaging 262,064 square feet per quarter over the past five quarters. At the same time velocity within "Class A" space has increased dramatically during the same period of time. First quarter 1993 recorded leasing velocity of 488,683 square feet for "Class A" space, while First Quarter 1994 recorded leasing velocity of 900,650 square feet - an increase of 84 percent.
A boost in market confidence can be seen from the recent trend of increased leasing velocity in "Class A" properties. This trend, partly due to a continual decline in rental rates, is resulting in a tightening of availabilities in the higher quality space.
Clearly, Westchester and Fairfield counties present distinct pictures: one market beginning its journey of recovery, the other firmly trekking toward the finish line.