Fairfield, Westchester weathering economic storm well.
With unemployment at a year 2000 average of 1.4% in Stamford-Norwalk and 3.0% in Westchester, businesses struggled to find qualified workers. Downsized workers were finding employment through the first quarter of this year as unemployment dropped. In May of 2001, the unemployment figures started to rise in both Stamford-Norwalk and Westchester County to 1.9% and 3.2% respectively. Job growth remained positive through the second quarter but gains were about half of what they were last year.
Westchester County took a slow and steady approach to growth after losing large employment bases when corporate giants such as IBM, AT&T, and Kraft downsized in the early 90s leaving a large qualified workforce and massive vacant structures on the market Small entrepreneurial businesses emerged as downsized workers creatively participated in the economy. Small to mid-sized internal businesses grew and businesses seeking quality of life for their employees migrated from Manhattan. Vacancy rates shot up well over 30% and took a long time to drop. From second quarter 1997 to second quarter 2001 vacancy was cut almost in half to about 15.3%.
Growth in business and financial services spurred office occupancy. Technology businesses flourished as talk of a "new economy" propelled Internet start-ups. Insightful new owners of large, vacant buildings renovated and repositioned those buildings to attract small, high growth businesses. In the wake of the slowed economy, the overall Westchester vacancy rate moved up one percentage point in the first half of 2001 from a ten-year low of 14.3%. The White Plains CBD was hit with the lion's share of that additional vacancy. White Plains vacancy had been reduced to a ten-year low of 18.0 % at first quarter 2001. It then bumped up to 19.3% at second quarter. Consistent with national trends, sublease space is responsible for a larger portion of the increase in available inventory.
Economic stability returned to Fairfield County after the early 90s recession at a much faster pace than Westchester. The burgeoning New York City financial services businesses that wanted quality of life for their workforce and convenience to Wall Street migrated to Stamford and Greenwich. Business services grew as marketing, advertising, new media and technology-related businesses took root throughout the county. Like Westchester County, the demise of the Internet start-ups caused office vacancies to increase.
However, by the time of the fall-out, Fairfield County's office market was so tight, additional available inventory was seen as increased opportunity to growing businesses. Countywide availability is at 11.8% and 12.9% in Stamford. Business growth has slowed, particularly in financial services. While growth in business service is far below that of the mid to late 90s, it is still the dominant force behind leasing activity.
New construction entered the Fairfield County market in 1996 and broke ground to meet immediate demand. Most of the new projects went up in the eastern part of the county where land and construction costs allowed landlords to offer reasonable rents compared to Stamford and Central Fairfield County, where businesses were faced with huge increases for renewals and expansions. Central Fairfield County experienced about 850,000 SF of new office starts, all within the Route 7 Corridor which connects Norwalk and Wilton. The corridor is forming an active business hub that offers commuter convenience and access to a broader labor pool.
Westchester County has not experienced new office construction but has experienced the transformation of functionally obsolete buildings into prominent business locations like Reckson's Metro Center at 360 Hamilton Ave. The suburban New York markets achieved equilibrium in 2000 and are tipping only slightly toward the supply side. If asking rents remain stable, the next wave of growth may spur construction of one of the proposed 560,000 SF towers along I-95 in Stamford.
Landlords on both sides of the state lines are confident in the strength of the market. They are holding asking rents at the levels achieved in 2000. However, they are negotiating concessions to compete with sublease opportunities. By way of comparison, overall average class A rents are about $37 per SF in Fairfield County and $29.20 per SF in Westchester. The central business districts of Stamford and White Plains are asking $45.27 per SF and $30.15 per SF respectively.
With vacant office space piling up and asking tents dropping in Manhattan, the flow of businesses out of the city may diminish for awhile. When financial markets recover and the economy moves forward, Fairfield and Westchester will be poised to grow. Both counties have begun to address housing issues that threatened population and labor force growth. Office construction is halted, but cranes are up for multi-family projects that will offer several hundred units in or near Stamford and White Plains. The suburban New York office market is a cautious and optimistic one.
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||New York counties|
|Author:||COYLE, MARY PAT|
|Publication:||Real Estate Weekly|
|Article Type:||Brief Article|
|Date:||Sep 12, 2001|
|Previous Article:||Long Island hitting its share of homers (and singles and doubles).|
|Next Article:||Insignia executive: Sublease space golden opportunity for landlords.|