Optimism remains in Westchester/Fairfield market.
While off the record-setting pace of 1994, the Fairfield-Westchester region's office market ended 1995 with significant gains. More than a million square feet of office space was absorbed in 1995, and office vacancy rates continued to fall throughout the region. In fact, over the past two years nearly 4.5 million square feet of space has been absorbed in the region. So far, it appears our region is weathering the upheaval of corporate downsizings.
Although the region has its fair share of well-known Fortune 500 companies headquartered here, notably IBM, Texaco, PepsiCo, Champion International, Xerox and Olin Corp., there's a new group of companies driving today's market. They include such names as Swiss Bank, GE Capital, MasterCard, Oxford Health Plans, Duracell, Mercedes-Benz Credit Corp., ITT Industries, Group W, CUC International and Ciba Corp.
Some of these companies are growing at unprecedented rates. GE Capital currently occupies more than a million square feet in Stamford. And Oxford Health Plans, which already occupies 450,000 square feet of space in Fairfield County, expanded into Westchester with a 265,000 square-foot lease in downtown White Plains.
Unlike past eras of growth in our region, this upturn is occurring with little or no new construction. In general, the office market is not growing in dimension as much as it is filling space. The bulk of the available inventory is a result of companies that have downsized or left the region entirely.
For example, GE Capital found its much-needed space by acquiring the headquarters facilities of both Olin Corp., which moved to 174,000 square feet of space in Norwalk, and Waldenbooks, which relocated to Michigan. Oxford Health Plans leased space that had been vacated by IBM in the Westchester One office tower in White Plains. MasterCard, which relocated from Manhattan, acquired a former IBM complex in Purchase. And Tenneco moved its headquarters from Houston to a former headquarters facility in Greenwich.
However, there are several major new corporate headquarters in the region. Swiss Bank has broken ground on a 1 million square-foot headquarters in Stamford; IBM has announced plans to build a new headquarters on its property in Armonk; and Duracell recently completed its new headquarters in Bethel.
Financial services, health care, and telecommunications have emerged as the engines of growth for our region. Advances in computer technology and communications have made our region particularly attractive for financial services companies, which no longer have to be in Manhattan to do business. Greenwich has become a mecca for New York City investment companies, whose senior executives live nearby. Farther north in the Shelton-Trumbull area, NASDAQ is planning a major expansion of its data-processing center, which handles all transactions for the nation's fastest growing stock exchange.
Now that the region's economy has regained its footing, it's time to tackle some of the tough, underlying problems which continue to hamper future growth. Housing and taxes remain prohibitively high, placing our region at a competitive disadvantage to other markets in the nation.
For example, in the suburbs of Charlotte, North Carolina, you can expect to pay about $150,000 for a 4-bedroom, 2,200 square-foot home. Property taxes there are about $1,800 a year. Compare that to what you would pay for a comparable home in Westchester or Fairfield counties and you see why our region is losing ground to the Sunbelt.
Interestingly, our region's office rents compare quite favorably to Charlotte, where gross rents average $23 per square foot. Gross rents in the central business districts of Stamford and White Plains average $24.50 and $27.50 per square foot, respectively.
Another area of concern for the Fairfield-Westchester region is the viability of our transportation network. While there have been some significant improvements, i.e. the modernization of the Westchester Airport and the reconstruction work along 1287 in Westchester and 1-95 in Connecticut, our roads are choking with rush-hour traffic. A well-functioning and efficient road network is critical to the future of the region's office market.
Both New York and Connecticut are taking steps to reduce the cost of government at the state level, but spending and taxes at the local level remain too high. Efforts to streamline municipal government through consolidation are met with stiff resistance from communities who fear loss of local control. Generating additional tax revenue through new development is also difficult because of the anti-development environment in many communities in this region.
The fundamental strength of our region's economy has served us well through several tough years. With another good year behind us, this is no time for complacency. Long-term issues such as housing, taxes and transportation must be addressed if we are to preserve our region's excellent quality of life and position ourselves for continued growth into the next century.
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|Title Annotation:||Annual Review and Forecast; Fairfield, New Jersey; Westchester County, New York; office market|
|Author:||Rostenberg, John H.|
|Publication:||Real Estate Weekly|
|Date:||Jan 31, 1996|
|Previous Article:||Manhattan realty '95: the go-go, slow-go & no-go.|
|Next Article:||1996: a very new year for Westchester market.|