Overall picture looks good for Westchester/Fairfield.
It's my belief that Westchester now has a 3-5 year supply of leasable space, which should begin to evaporate over the next 2 years, as the economy and the local business base begin to stabilize.
Another positive factor is that development remains at a standstill and furthermore, as the NYC market begins to tighten up over the next 3-5 years, for leasable (not obsolete) buildings, rents will begin to increase once again, making Westchester financially attractive. Today's depressed NYC rental rates have dramatically reduced the once advantageous financial spread.
Westchester's overall future will be a positive one. Its labor pool consisting of Rockland County, New Jersey, Manhattan and Connecticut, its close proximity to New York City, and most importantly it now has secure solid ownerships in place like The Prudential, MetLife, Aldrich, Eastman & Waltch, The Principal, Mitsubishi Trust & Banking Corporation, etc., etc. These are all key ingredients which will sustain the county over the long term.
However, and unlike Connecticut, Westchester will suffer from time to time with its inability to compete with NYC government oriented business incentives offered to large and small tenants who threaten to vacate; which have been substantial as of late. The recent announcement of MasterCard to remain in NYC, is a good example of what Westchester will have to continue to deal with as the City exercises its financial might in coping with its own economic woes.
On the other hand, the Fairfield County office market of approximately 32 million square-feet seems to be stabilizing after being hit hard by the gripping New England recession. Many of the major foreclosure proceedings have already taken place and new solid ownerships like The Prudential, Sam Zell (Zell/Merrill Lynch), who purchased half of the former Rich portfolio in downtown Stamford totaling approximately 1.5 million square-feet, and Metlife, which now holds title on a majority of the other half of the former Rich portfolio, are good examples of the solid institutional shift which has occurred over the last year.
Metlife, Zell, and Prudential among others, have made long term commitments to their properties and the area.
Reflecting this trend of stability, tenants like WITCO, Oxford Health Plans and Dun & Bradstreet have recently all signed large corporate headquarters leases totaling over 500,000 sq.ft. All of the above variables have led the county vacancy rate to drop from 24 to 22.2 percent. Additionally, rental rates in the better quality buildings, although still down almost 25 percent from the late 80's, average around the low to mid $20's per square-foot, and they seem to be holding.
The overall outlook for Fairfield County is a good one as evidenced by a slow, but across the board dip in available space. And without any substantive building slated for the foreseeable future, the supply should be absorbed over the next 2-4 years.
Further, the county's proximity to NYC, which has always been a key draw for corporate executives who live nearby and need access to NYC, but do not desire or have the need to be located there, will continue to lead Fairfield's commercial office space market.
Unlike neighboring Westchester County, Fairfield's business base is diverse, lessening the risk of a dramatic decline when one or two major corporations contract. On the other hand, Fairfield County will continue to struggle with its cost of living issues; which are among the highest in the nation.
Despite these factors, the quality of life standards and the aggressive state initiated pro-active business attitude and incentive packages, will continue to outweigh the negatives.
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|Title Annotation:||Suburban Markets; evaluation of office leasing market in Westchester County, New York and Fairfield County, Connecticut|
|Publication:||Real Estate Weekly|
|Date:||Oct 20, 1993|
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