Corporate consolidations hamper Westchester recovery.
According to the Rostenberg-Doern Corporate Real Estate Report released this month, Westchester's vacancy rate for 1993 was 26.9 percent, about four points higher than 1992. Absorption for 1993 was a negative 1.25 million square feet, more than double the negative absorption reported in 14992.
"The corporate consolidations that began in our region in the late 1980s are continuing to have a major impact on the county's corporate office market. IBM, AT&T, TWA AND NYNEX have dramatically reduced their presence in the market," said John H. Rostenberg, principal of Rostenberg-Doern Company, Inc.
However, leasing activity in Westchester is steady, with approximately 1.5 million square feet of space leased in 1993. Among the major leases in Westchester County in 1993 were Transamerica's lease of 125,000 square feet at the former Nestle headquarters in Purchase; Research Institute of America's lease of 52,248 square feet in Valhalla; and Dannon's relocation from White Plains to 37,000 square feet in Tarrytown.
The eastern half of the county, which includes the I-287 corridor, is showing signs of a recovery. In the second half of 1993, more than 325,000 square feet of space was absorbed in this market. Most of the gain has come from medium-sized lease transactions of 10,000 to 20,000 square feet.
Despite the problems currently facing Westchester County's office market, there are signs of strength in the market.
Westchester County's large institutional property owners, - The Principal Financial Group, Prudential, CIGNA and General Motors Pension Fund - have held onto their Westchester properties despite the downturn in the market, and some have made major investments in upgrading their properties.
Other sectors of Westchester's economy are thriving as well. Housing construction is on the rebound and retail construction is active, especially in downtown White Plains.
"All of these signs point to a steady, albeit slow recovery in Westchester County's economy. For the Westchester office market, which remains vulnerable to corporate downsizings, the recovery will take a little longer," Rostenberg said.
Rostenberg said Westchester County could greatly benefit from the same type of economic development program launched by the State of Connecticut in 1993.
Fairfield County, which has been the maid beneficiary of the state's economic development efforts, enjoyed a healthy office market in 1993. More than 1.1 million square feet of space was absorbed countywide and the vacancy rate fell to 22.6 percent.
"Westchester County's business and political leaders have taken serious steps to promote economic development, the most recent being the successful effort to keep Transamerica in the county and the efforts under way to retain Ciba. However, the county can't do it alone. The state, because of its resources, must be the driving force and part of the process, Rostenberg said.
The survey of Westchester County's five market areas showed:
Westchester Central Business District: Downtown White Plains ended the year with a record high vacancy rate of 35 percent, up from 28.9 percent in 1992, and a negative absorption of more than 393,000 square feet. Significant consolidations by IBM at the Westchester One office tower accounted for most of the negative absorption. Cutbacks by AT&T and NYNEX have also hurt the downtown office market. Leasing activity by smaller companies remains steady but is not enough to offset cutbacks by major companies. MAJOR DEALS: Advest, Cerussi & Spring, Ernst & Young, First Fidelity, ISSC, Reane & Bean, New England Life Insurance, and Waterhouse Securities.
Westchester East: Strong leasing activity in the second half of the year helped reduce earlier losses in the Harrison-Purchase-Rye office market. The vacancy rate rose from 22.9 percent in 1992 to 26.1 percent, while absorption for the year was a negative 322,915 square feet. The Transamerica lease for 125,000 square feet in Purchase was the largest deal of the year in Westchester. Activity has been particularly strong among small to mid-sized companies. More than 50,000 square feet of leases were signed at the various properties owned by The Principal Financial Group. However, IBM's decision to relocate from its Purchase office facility added 472,000 square feet of space to this market's inventory. MAJOR DEALS: Apple Computer, A&W Brands, Entex, Frustum Group, General Foods Federal Credit, Magi Educational, Market Data, MCI, Melville, Miller & Miller, Moskowitz-Jacobs Inc., Prodigy, Prudential, Reuben Donnelly and Transamerica.
Westchester West: This market, which is primarily the Route 119 corridor in Tarrytown, finished the year with a vacancy rate of 24.2 percent, up nearly 8 points from 1992. Absorption which totaled 60,000 square feet in 1992, was a negative 256,784 square feet for 1993. As in downtown White Plains, this market is being adversely affected by IBM consolidations, which have put approximately 280,000 square feet of space back on the market.
Westchester North: The announced relocation of TWA's headquarters from Mount Kisco to St. Louis was a setback for the country's northern office market in 1993. The vacancy rate rose from 21.6 percent in 1992 to 26.1 percent. Absorption, which last year totaled more than 150,000 square feet, was a negative 202,395 square feet for 1993. Other companies vacating space in this market in 1993 included Barclay's, AT&T and Allstate. On the positive side, Research Institute of America leased approximately 52,000 square feet in Valhalla. MAJOR DEALS: Research Institute of America and Emigrant Savings Bank.
Westchester South: The Yonkers Mount Vernon-New Rochelle market showed a slight rise in its vacancy rate for the year from 15.9 percent in 1992, and absorption was a negative 75,443 square feet. UNICEF's decision not to relocate its headquarters to New Rochelle was a disappointment for this market in 1993.
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|Title Annotation:||Annual Review & Forecast, Section IV; office leasing market, Westchester County, New York|
|Publication:||Real Estate Weekly|
|Date:||Jan 26, 1994|
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