Report: Westchester office leasing stabilizes over first quarter.

While the Westchester County market continues to see a lack of velocity in transaction activity, the first quarter of 2003 represents an ongoing stabilizing trend for both vacancy and availability rates with little or no change from last quarter. Vacancy has not been in the single digits in the last three years and the lowest level of vacancy during this period was in the fourth quarter of 2000 at 10%. However, in comparison to the surrounding areas of New York City, Fairfield County, and New Jersey, which have had as much as a 200% increase in vacancy, the Westchester vacancy rates have only risen on average by 35%.

Several inquires have been made by major corporations considering relocating to the area; however, the county continues to display the same traditional level of leasing activity, which includes a predominant amount of smaller transactions as well as occasional larger deals. For example, this quarter the major transactions are as follows: Hogan and Hartson leasing 19,000[+ or -] SF at 44 South Broadway in White Plains, Bresnan Communications taking 29,000[+ or -] SF off the market at One Manhattanville Road in Purchase, and New York Life renewing for 25,000[+ or -] SF at 411 Theodore Fremd Ave. in Rye. The only transaction in excess of 30,000 SF is Ameriquest's lease of 118,000[+ or -] SF at 333 Westchester Ave. in White Plains.

Recent construction inventory is fairly inactive, and is not likely to change until major commitments by credit-worthy tenants are made. Average asking lease rates decreased from $26.65 to $25.67.

Westchester County's unemployment rate as of, January 2003, at 4.3%, was lower than the national rate of 6.3% and the state rate of 6.5%. During the period January 2002 to January 2003, the number of jobs increased by 1,400, or 0.3%. The county experienced a 3.7% rise, an increase in 1,600 jobs from January 2002, in the Goods Producing sector which includes manufacturing, and natural resources, mining and construction.

The overall vacancy rate remained the same as last quarter, at 13.2%. The Class A vacancy rate increased from 14.3% in Q4 02 to 14.7% in Q1 03, while the Class B vacancy rate decreased from last quarter's 8.9 to 8.6%. The availability rate for the Westchester County Office Market increased slightly from last quarter's 15.1%, to 15.3% this quarter.

In contrast to last quarter's positive net absorption of 197,93% SF, the absorption for first quarter 2003 is a negative 129,765[+ or -] SF. The only positive absorption can be found in East-I-287 at 34,245[+ or -]. SF. The submarkets that experienced negative absorptions are White Plains CBD with 108,147[+ or -] SF, West 1-287 with 21,473[+ or -] SF, Southeast with 23,371[+ or -] SF, Southwest with 9,240[+ or -] SF and Northern Westchester with 1,779[+ or -] SF. The total net absorption for last year was a positive 243,534[+ or -] SF.

Westchester County's average asking lease rate decreased from $26.65 in Q4 02 to $25.67 per SF in Q1 03. The Class A average rate for the quarter decreased from $27.30 to $26.89 per SF, while the Class B average rate increased from $21.95 to $23.28 per SF. Two aberrations to this range are a Class A building in White Plains and a Class B building in Scarsdale, which have the highest asking lease rate at $35 $36 per SF.

There are no buildings under construction this quarter. The county has 16 proposed projects under consideration, totaling 3.38[+ or -] million SF of space.