Westchester, Fairfield corridors may hit 10-year occupancy record.

Downtown White Plains: $25 to $27 per square foot.

Greenwich: $35 to $40 per square foot.

Stamford: $28 to $34 per square foot.

These are not the asking prices; these are the effectuated rental rates before utility charges and parking fees.

In 1997, the two counties absorbed more than 7 to 10 percent of their respective excess Class A vacant office space. Today, if a broker were to represent a relocating New York City tenancy requiring 60,000 to 100,000 square feet in a Class A property anywhere in the White Plains, Greenwich, or Stamford environs, the broker could not find more than 14 to 15 opportunities, including the sub-lease market.

It can be said that the two counties' vacancy rate is in direct correlation to market conditions, however, the rental rates are not. We have recently witnessed and will continue to experience dramatically higher rental rates due primarily to acquisitions by our regions' REITs and large-block portfolio owners. Many recent acquisitions were made at an 8.5 to 10.5 cap rate, and it is imperative that these entities (i.e., First Equity, Mack-Cali and Reckson) provide a higher yield to their investors. With a large percentage of the two counties' "trophy properties" in the control of a few, we are likely to see a greater disparity between Class A and B product in the coming year, which I anticipate to be as much as $6 to $10 per square foot.

The greatest short-term beneficiaries of the Class A office markets escalating rental rates and occupancy levels will be felt by the tertiary markets of Hawthorne, Armonk, Mount Kisco, New Rochelle, Yonkers, Norwalk, Bridgeport and others, who had been hit hard over the last five to 10 years. For example, it was not more than 12 years ago that Armonk was effectuating $20 plus rental rates. In the last five years, deals were effectuated as low as $14.50 per square foot. This will change quickly.

A renewing tenant who may have entered the Class A office market from the aforementioned tertiary markets in the last five to seven years, either in a direct or sub-lease transaction, is probably in for a fair market value "sticker shock." Portfolio owners such as First Equity, W&M Properties, Mack-Cali, Reckson, Cappelli, Principal and EastRidge, who were all forced to capitalize transactions at levels that had little economic viability just to keep their buildings tenanted, are now going to "eat their cake." There aren't the options of moving next door for a cheaper deal or taking advantage of a heavily-discounted long-term sub-lease, and the owners realize it.

This overall resurgence has also been witnessed in our industrial and flex properties. Over a year ago, we tracked over 15 mainstream distribution/R&D/flex properties that could accommodate requirements in excess of 50,000 to 75,000 square feet, either for lease or sale. Today, with the exception of build-to-suit situations, there exist only three. This is well-evidenced by many of the local REITs taking a hard look at any industrial or flex properties that may come to market or may be available as a sale lease-back situation or possible acquisition candidate.

Other key market sectors which will likely continue to increase both Westchester and Fairfield future real estate values are alternative land users, such as big box retailers, congregate cares or assisted-living operators, extended stay hoteliers, and various entertainment-related operators. These users can afford to pay higher floor area ratio (FAR) prices for vacant land or redevelopment opportunities than the conventional office or flex developer due to the greater return on their development dollars.

In conclusion, 1998 will be a year of continued growth and absorption, and we will likely see the redevelopment of presently vacant buildings and complexes that will provide new opportunities for either the relocating metropolitan or locally-expanding company.