Record-Setting year for Westchester County Office Market.
In total, leasing velocity over the past 12 months reached an all-time high of 3.3 million SF, while absorption totaled approximately 1.1 million SF and the availability rate dipped to 11.6%. Nearly a third of all leasing in Westchester last year involved expansions by local businesses. Small and mid-sized companies throughout the county also saw rapid growth during the year.
Approximately 3.3 million SF of space was leased countywide in 2000, a record high for the county and a 17% increase from 1999's record-setting total of 2.8 million SF. The central business district of the City of White Plains and the Westchester East office corridors were the county's hottest leasing areas in 2000 -- 64% of the total space leased countywide took place in these markets, as did six of the top ten lease transactions of the year. Four of Westchester's five submarkets posted gains in leasing from the year before, with the Westchester East submarket reporting the most improvement - a 34% increase in velocity to 1.1 million SF.
Reflecting an overall strengthening of the local economy, the county's results saw a significant increase in larger lease transactions in 2000. In fact, the average new lease this year totaled 8,204 SF -- 13% higher than 1999's average size transaction. In addition, 1.7 million SF of leases in 41 transactions of 20,000 SF or larger took place during the year. In 1999, 1.3 million SF in only 30 transactions were completed in that same category.
Westchester also saw the advantages in 2000 of a more diversified tenant base that is less reliant on the large Fortune 500 companies whose downsizing in the 1980's plunged the office market into a prolonged slump. Of the year's 20 largest lease transactions, 12 involved "new economy" or high technology, telecommunications, and new media companies.
The ten largest lease transactions of the year were Starwood Hotels & Resorts Worldwide's 203,110 SF at 1129 Westchester Ave. in White Plains; Metromedia Fiber Network Inc.'s 79,650 SF at 360 Hamilton Ave. in White Plains; New York Power Authority's 64,810 SF at 440 Hamilton Ave. in White Plains; Heineken USA, Inc.'s 63,440 SF at 360 Hamilton Ave. in White Plains; Wilson, Elser, Moskowitz, et al's 57,990 SF at 3 Gannett Drive in White Plains; Northern Telecom's 57,460 SF at 200 Summit Lake Drive in Valhalla; TradeOut.com's 56,870 SF at 100 Summit Lake Drive in Valhalla; CIGNA Corporation's 56,150 SF at 120 White Plains Road in Tarrytown; Berkeley Educational School's 52,000 SF at 99 Church St. in White Plains, and Nextel of New York, Inc.'s 50,170 SF at 565 Taxter Road in Elmsford.
For the second straight year, net absorption in Westchester not only remained positive but continued strong in 2000. In total, approximately 1.1 million SF of space were absorbed during the year, bringing the total amount of positive absorption in the county for the past two years to more than 2.3 million SF. Three of the five submarkets posted gains in absorption from 1999, with downtown White Plains reporting the highest total - 506,210 SF, a 9% gain from 1999. The county's absorption achievement for this year, however was a slight decline from the 1.2 million SF absorbed in 1999. Several large blocks of space returned to the market during the year, most notably 93,550 SF by Prodigy at 44 S. Broadway in White Plains and 101,450 SF by Prudential at 200 Summit Lake Drive in Valhalla, contributed to this result. The fourth quarter of the year was especially affected by these returns -- only 49,000 SF of space was absorbed countywide during that time, compared to an average of more than 300,000 SF absorbed in each of the previous three quarters.
A combination of strong leasing activity, steady absorption, and no new office construction significantly reduced the amount of available office space and pushed availability rates to record lows throughout the county in 2000. The overall availability rate fell more than three percentage points from a year ago to 11.6% -- a record low for Westchester county. Downtown White Plains, long the bastion for most of the county's available space, saw its availability rate plunge to 15.1% -- a decline of more than seven percentage points from 1999's rate and almost 15 points lower than the end of 1998. Four of the county's submarkets ended the year with lower availability rates compared to last December, with Westchester South posting the county's lowest rate - a previously unheard of 5.5%.
At the end of 2000. approximately 3.9 million SF of space remained available in the county - 21%, or more than 1 million SF, less than at the same time a year ago. More significantly, larger blocks of space that traditionally were a challenge to lease saw the lion's share of the supply reduction -- 15 blocks of available space of more than 50,000 SF were available as of December 31st, down from 23 blocks a year ago in that same size range. Only six blocks of space measuring 100,000 SF or more remained available at the end of this year, down from nine blocks a year ago.
Although still remarkably reasonable when compared to neighboring areas, rental rates in Westchester are finally beginning to reflect its strong recovery as building owners regain confidence in the market's long-term strength. At the end of the year, the average asking rental rate countywide totaled $25.83 per SF, a gain of $2.38 per SF or 10% from December of 1999. The Westchester East submarket had the highest rental rate -- $27.59 per SF -- while Westchester South was the county's most affordable at $17.91 per SF. Downtown White Plains, where numerous major building renovations have considerably upgraded several properties, showed the largest increase in rents -- a 16% jump to $26.96 per SF. In trophy properties, asking rents have reached more than $30.00 per SF.
While 1999 saw new construction in the form of Swiss Re's corporate headquarters in Armonk, there was no new office construction initiated in the county during 2000. Instead, major building owners concentrated their efforts on renovating and upgrading existing buildings for multi-tenant use, with most of this activity occurring in the City of White Plains. Meanwhile, some owners are poised for future office construction if the need arises: Reckson Associates has approved plans for another office building at its Reckson Executive Park in Rye Brook and Louis Dreyfus Property Group recently announced plans for constructing a 75,000 SF building at Sutton Park in Valhalla.
More than any other of Westchester's submarkets, the White Plains CBD reaped tremendous gains from the recent economic strength and on-going renovation at several buildings. In one year, the supply of available space in the city fell 33% from 1.4 million SF to about 948,110 SF. Consequently, the city's availability rate fell more than seven percentage points to 15.1%, the lowest rate in at least a decade. Large blocks of available space were tremendously reduced as well - as of the end of December, only one block measuring more than 100,000 SF of space was available in the CBD. Last year at the same time, there were five. Leasing velocity of 994,290 SF represented an 18% gain from the year before, while net absorption totaling 506,210 SF was 9% higher than in 1999 and accounted for 46% of the total space absorbed in the county.
The city's average asking rental rate rose 16% from the year before to $26.96 per SF. Among the companies signing major leases in the city were Metromedia Fiber Network, New York Power Authority, Heineken USA Inc., Berkeley Educational School, TMP Worldwide/Monster.com, Blue Sky Studios, and InSite Services LLP.
The county's largest submarket was also one of the most active in 2000, seeing 34% of all leasing activity and 44% of total absorption in the county.
Fueled by some of the largest lease transactions of the year - including Starwood Hotels & Resorts Worldwide's 203,110 SF at 1129 Westchester Ave. -- leasing in the segment leapt 34% from 1999 to 1.1 million SF -- the highest of any submarket in the county. Net absorption jumped 70% to 485,360 SF, due to very little newly available space.
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|Publication:||Real Estate Weekly|
|Date:||Jan 24, 2001|
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