Westchester and Fairfield well placed for corporate relos.

In the bordering class A and B office markets of Westchester and Fairfield Counties, which comprise between 79 to 88 million square feet (depending on what national and or regional listing service or brokerage entity report you analyze) what is universally apparent is the presently reported vacancy rate in both counties that, in my opinion, are going to significantly spike by between 2% to 4% in the very near term.

The Westchester and Fairfield Commercial Corridors maintain some of the most substantial, completely vertical, privately held, National Portfolio, Pension Fund and REIT real estate entities in the country.

Having said that, one could not have anticipated the present and future imminent retrenching by some of our county's long term "staple" tenancies, such as Transamerica (recently acquired by GE Capital), Reader's Digest, Atria, American Express, and AT&T, to name a few.

The recent CBRE year end report indicates a mid-teen vacancy rate down by almost 1% in Fairfield and approximately 1.5% in Westchester. This almost identically parallels the year end report by CoStar Realty Services for both Westchester and Fairfield Counties.

Additionally, they both reflect effectuated rental rates being relatively flat throughout 2003 in Westchester, with a significant decrease of between 7% to 9% in Fairfield. These figures, however, do not portray the full picture.

During my two decades in the metropolitan suburban market, I have never seen over 50 built Class A and B corporate and or headquarters spaces, or signature buildings (40,000 s/f -150,000 s/f) either available on a sublease or direct basis in our market simultaneously.

Eliminated from this figure is the 630,000 +/- s/f Rye Brook, NY Atria headquarters complex and the recent announcement of the 590,000 s/f headquarters building of Reader's Digest, which will soon be marketed on a sale/leaseback basis.

In addition, there is some possible opportunity in the Northern Westchester market for over 100,000 +/- s/f in the premier 206,000 s/f Taconic Corporate Park in Yorktown Heights.

One of the foremost factors that has been the catalyst for varied recent relocations of formerly based New York tenancies such as New York Life, Morgan Stanley, Normura Securities and others, who have made significant space commitments either through acquisition or in long term lease commitments in our region, has been the recognition of both our counties of the quality of life and availability of class A office product.

I believe this will ultimately stabilize our market.

Secondly, our present inventory of available space is of a diverse nature. From the 160,000 s/f space at the One Pepsi Way property in Somers (two, 80,000 s/f floors available) to varied class A high rise towers such as 400 Atlantic Street in Stamford (approx. 147,000 s/f. available for lease) to the dramatic Atria Corporate Campus in Rye Brook, NY (635,000 +/- s/f), to over 400,000 +/- of s/f. available at the very unique, former facility of Union Carbide in Danbury, CT.

It is important to note that local owners, in recognition of getting large blocks of vacant space back in their buildings in the near future, have in advance effectuated "buy-outs" or agreed on such "escape provision amounts" with what would have been conventional subleasing tenancy.

In many cases, this strategic tact was enacted to fund in advance varied capital improvement programs for their building, or incentivize a transaction prospective tenant by being able to extend an upgraded workletter contribution, or provide a substantial free rent period previously absent in our marketplace.

This, in effect, avoids the potential deterioration of the property owners future effectuated direct rental rates and ensures the overall equilibrium to the market. While there has been substantial lateral movement within our counties over this past year, there has been minimal net absorption which in the near term will only fuel a weakened market and lower net effective rental rates.

It is not until large block 40,000 to 150,000 s/f New York City relocating tenancies recognize the enormous occupancy and operational cost savings, coupled with the quality of life advantages, that we may be able to stabilize our market and see an increase in our ultimate per square foot rental rates.