First quarter shows mixed results for Westchester/Fairfield markets.

The first quarter of 1998 turned in mixed results, as leasing activity slowed in Westchester/Fairfield, according to recently released statistics from Newmark & Company Real estate, Inc.

Westchester County's availability rate rose to 16.4 percent from 15.8 percent, with negative net absorption of 195,028 square feet. Fairfield County followed suit with availability rates increasing to 11.9 percent from 10.9 percent.

Weighted average asking rents in Westchester retreated to $20 per square foot, a level not seen since 1996, while rents in Fairfield continued to rise for the fifth successive quarter to reach $20.17 per square foot.

Westchester County

The Westchester County real estate market regressed to mid- 1997 levels as its growth trend took a downturn. Availability rates rose and rents fell in the first three months of 1998, as negative net absorption (195,028 square feet) forced the availability rate up to 16.4 percent, upsetting five straight quarters of diminishing availabilities.

This slowdown can be attributed to activity within Eastern Westchester, where 363,570 square feet came back onto the market. Since June 1997, this district has returned 505,734 square feet of office space to the market and availability has risen to 17.1 percent from a decade-low 12.8 percent in the fourth quarter of 1997.

Largely responsible for this increase in available space was the reappearance on the market of the 600,000 square-foot complex at 250 North Street, the former headquarters of Kraft Foods. The four-building office park came back on the market with the advent of Cohen Brothers Realty Corporation's contract to purchase the space. Cohen Brothers is interested in leasing mainly large blocks (50,000 square feet and over) to top flight corporate tenants. If not for 250 North Street, Eastern Westchester would have posted positive absorption of 240,000 square feet and an availability rate under 12 percent.

The White Plains CBD turned in Westchester's strongest numbers by absorbing 119,459 square feet and posting a 1.9 percentage point drop in availability to 24.7 percent. Northern and Southern Westchester had moderate quarters, posting positive net absorption of 76,328 square feet and 36,146 square feet, respectively.

Northern Westchester continued to set the pace with an availability rate of 7.4 percent, down from 9.1 percent. On the negative side, Western Westchester joined Eastern Westchester with 63,391 square feet of negative net absorption. Though three districts posted positive numbers for the quarter, the re-emergence of 250 North Street over-shadowed this advance and put a negative spin on the quarter for the submarket as a whole.

Rents in Westchester retreated 2.3 percent to $20 per square foot from $20.47. For the past two years, rents have hovered in this range, and only in December 1996 did they dip under $20 per square foot to $19.83. Leading the way down were the White Plains CBD (down 7.7 percent to $20.02 per square foot) and Southern Westchester (off 7.4 percent to $13.25 per square foot). Rents in Southern Westchester have decreased 10.1 percent over the last 12 months to reach a two-year low.

Western and Northern Westchester experienced less significant declines, as rents fell to $20.18 per square foot from $20.66, and $18.28 per square foot from $18.31, respectively.

Eastern Westchester alone experienced an increase in rents, though it was negligible at best, rising $.04 to $23.32 per square foot.

The outlook for rents in this district is positive, due to the bolstering effect 600,000 square feet of Class A office space, priced accordingly, will have at 250 North Street.

Fairfield County

Fairfield County negatively net absorbed 78,304 square feet in the first quarter of 1998. Further analysis reveals that a preponderance of sublet space came onto the market and offset an otherwise healthy amount of leasing activity. At the heart of this anomaly was Stamford's 336,626 square feet of negative net absorption, of which 255,882 square feet was sublet space. Negative net absorption in Greenwich combined with Stamford to discount the gains made in Northern, Central and Eastern Fairfield.

County-wide availability rates rose in 1998's first quarter to 11.9 percent from a two-year low of 11.5 percent, even though the availability of direct space actually reached single digits (9.7 percent) for the first time. Eastern Fairfield accounted for more than 60 percent of this direct space absorption by posting the strongest quarter of leasing in all of Westchester/Fairfield. Northern and Central Fairfield joined Eastern Fairfield, turning in positive numbers. Availability in all three districts achieved a two-year low.

The premier districts in the Fairfield submarket led the decline this quarter. Stamford's strong fourth quarter 1997 absorption was nearly negated by this quarter's performance. Net absorption of direct and sublet space over the last six months were 1,587 square feet and 2,564 square feet, respectively.

Greenwich experienced its second consecutive quarter of negative net absorption (40,253 square feet), but remains the tightest district in the Westchester/Fairfield market. Availability rose to 5 percent from 4.1 percent, but availability is still down 2.5 percentage points year-on-year.

Rents for the county rose for the fifth consecutive quarter, breaking the $20 per square foot mark at $20.19, up from $19.43. This represents a 15.8 percent year-on-year rise in rents. Chiefly responsible were rents in Eastern Westchester and Stamford, which have risen 26.3 percent and 20.1 percent, respectively. These two districts posted the only gains this quarter: Eastern Westchester's rents rose to $16.02 from $14.45 per square foot; and rents in Stamford jumped $1.03 to $24.09 per square foot.

Greenwich led the laggards with a 7.8 percent drop-off in rents to $26.51 from $28.75 per square foot. Central Fairfield's rents shrank from $17.06 to $15.92 per square foot, continuing the district's slide from its high of $18.22 per square foot in September 1997.

Meanwhile, rents in Northern Fairfield sank to $19.01, down from $19.58 per square foot. Though the sublet market drastically declined this quarter, direct leasing activity remained strong, and two important marks were set as availability shrank below the symbolic 10 percent margin and county-wide rents grew above $20 per square foot.

"Most of the decrease in availability is due to the expansion of existing tenants," said Stephen Banker, executive managing director of Newmark's Westchester/Fairfield office. "We expect activity in the second half of 1998 to include multiple large tenants relocating to the area from Manhattan, further adding to the frenzied search for quality space in Westchester/Fairfield."