New York recovery good news for Westchester market.

After witnessing a mildly lackluster commercial relocation activity in the class A and B Westchester and Fairfield county office markets at year end, all numbers, including vacancy, net absorption rates and a gradual increase in the effectuated rental rates, appear to indicate a stabilization and overall imminent recovery within our contiguous markets. During the first two quarters of this year, both Westchester and Fairfield counties have seen sparse large block New York City relocation requirements. Historically, and most prevalent in 2003, relocations have been the primary catalyst for a positive effect on the market numbers. Conversely, the redeeming interim positive has been an increase in lateral internal movement and growth within the two markets.

While some of the actual figures reported show an increase in the overall vacancy rate, (for example, Westchester's vacancy rate increasing by approximately 1.5%, from 13% at year end to our present 14.5%) this increase is primarily due to the 600,000 +/- s/f Atria Headquarters in Rye Brook presently entering the market. This increase also depends on how much of the varied blocks of sublease or shadow space is accountable. Relatively quiet Fairfield county has recently concluded notable transactions such as GE Capital's 40,000 s/f expansion at 401 Merritt 7 in Norwalk, Fact Set's 130,000 s/f consolidation into the new 601 Merritt 7 building in Norwalk and A.T. Clayton's recent move to Stamford at 300 Atlantic St. for 18,000 +/- s/f. These transactions have helped to lower Fairfield county's overall vacancy rate, which formerly stood at approximately 17.5% to 18% at year end 2003.

Westchester's recent recovery has been fueled over the last two quarters by companies like Nokia which recently acquired the vacant 102,525 s/f, soon-to-be-redeveloped 102 Corporate Park Drive property in White Plains and will be temporarily absorbing a large block of space soon to be vacated by Cadbury Schwepps at 709 Westchester Ave. in White Plains until its building is retrofitted and re-skinned. In addition, these factors have all led to our markets beginning to rebuild and stabilize: Lillian Vernon's 55,000 +/- s/f imminent relocation from Rye to 445 Hamilton Ave. in White Plains, Kraft's commitment for 70,000+ s.f at the Premier Christiana Building in Tarrytown, Nomura Securities' lease at 5 International Drive in Rye Brook for 45,000+ s/f and Ameriquest A.K.AArgent Mortgage's additional 40,000 +/- s/f lease at the Westchester One property in White Plains (Ameriquest presently occupies over 260,000 +/- s/f in the building).

While 2003 showed the greatest percentage drop in the effectuated rental rates, we have been fortunate to see little to no additional erosion over these past two quarters within our markets. Fairfield county presently is averaging approximately $26.00 per s/f plus electric, while Westchester county is averaging approximately $25.00 to $25.50 per s/f plus electric.

With a Westchester and Fairfield county combined market of approximately 80 million s/f (in over 800 +/- class A and B buildings), anticipated large block vacancies left by firms like TransAmerica at 100 Manhattanville Road in Purchase and Atria in Rye Brook will have a detrimental effect in the short term on Westchester's overall future vacancy rate figures.

Because of the various large blocks of second tier shadow space and direct space being slowly absorbed in the New York City marketplace, coupled with recent escalating rental rates, it is most definite that the suburban metropolitan markets will imminently benefit from the New York City recovery.

BY SCOTT H. BENSON PRESIDENT BENSON COMMERCIAL REALTY, INC.