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Westchester sees steady absorption, declining vacancy.

Bolstered by third-quarter results showing positive absorption of office space and lower vacancy rates, the Westchester County office market appears to be on track for a significant recovery in 1994.

According to the Rostenberg-Doern Quarterly Corporate Real Estate Report released September 28, the third-quarter vacancy rate for Westchester was 24.6 percent, down from 25.4 percent three months ago and 26.9 percent at the end of 1993.

Absorption, which is the net increase or decrease of occupied space over a period of time, totaled 235,087 square feet of space for the third quarter. For the past nine months, absorption totaled 564,079 square feet.

"By the end of this year we expect to see the completion of several major lease transactions in the county, including the anticipated MasterCard relocation to Purchase. Realistically speaking, absorption in Westchester County for 1994 could exceed a million square feet of space. This would be a dramatic rebound from 1993 when Westchester had a negative absorption of 1.25 million square feet," said William V. Cuddy, Jr., senior vice president and principal of Rostenberg-Doern Company, Inc.

Cuddy said the positive third-quarter results were achieved despite continued downsizing from major corporate office space users. "Thanks to strong leasing activity in the county's trophy buildings, Westchester's office market is maintaining a recovery that began in the second quarter of this year," he said.

Downtown White Plains, the country's central business district, reported nearly 77,000 square feet of absorption and a vacancy rate of 32.4 percent, down from 33.7 percent at midyear and 35 percent at the end of 1993. The downtown market reaped the benefits of being the hub of the legal community with the County of Westchester's Appellate Court lease for approximately 20,000 square feet.

Cuddy noted that approximately 60 percent of the vacant space in downtown White Plains is concentrated in three buildings - Gateway, Westchester One and 360 Hamilton Avenue. All three buildings have been adversely affected by the downsizing of either IBM or AT&T.

All five markets surveyed in Westchester reported declining vacancy rates and positive absorption. There is no construction activity in the county, continuing a trend that began more than three years ago.

"For the past six years the older properties in the market have underperformed. However, over the past nine months there's been growing market pressure to make these buildings competitive with major renovations or alternative uses. There's an emerging trend toward adaptive redevelopment of office buildings in Westchester and we expect that to continue for the next few years," said Cuddy.

The survey of Westchester County's five office markets showed:

Central Business District: The third-quarter vacancy rate in downtown White Plains was 32.4 percent, down more than a point from three months ago. Absorption totaled 76,792 square feet of space. For the past nine months, absorption totals more than 154,000 square feet.

Westchester County East: Good leasing activity in the I-287 office corridor of Harrison, Purchase and Rye was partially offset by several corporate consolidations. Third-quarter absorption was 22,831 square feet and the vacancy rate was 26.2 percent, down slightly from three months ago. Among the consolidations were Diversified Financial Services (formerly MONY) in Purchase, which returned 65,000 square feet to the market, and the vacating of 16,000 square feet by IBM in Harrison. MasterCard's pending relocation from Manhattan to the IBM building in Purchase will provide a tremendous boost for the county as a corporate headquarters location. It will also considerably reduce the inventory of available space in this market.

Westchester County West: The office market in the western half of the county, which is primarily the Route 119 corridor in Tarrytown, reported a decline in its vacancy rate from 15.8 percent at midyear to 14.8 percent for the third quarter. Absorption was more than 43,000 square feet for the quarter, and topped 320,000 square feet for the past nine months. The conversion of Axe Castle from office to hotel/restaurant space removed 26,000 square feet from the inventory.

Westchester County North: The third-quarter vacancy rate for the northern half of the county, which includes Mount Pleasant and Mount Kisco, was 22.2 percent, down from 22.5 percent at midyear. More than 42,000 square feet of space was absorbed in the third quarter, bringing the nine-month total to nearly 173,000 square feet. In a setback for this market, IBM vacated 50,000 square feet of space in two buildings in Ossining.

Westchester County South: The southern office market of Yonkers, Mount Vernon and New Rochelle absorbed more than 50,000 square feet of space in the third quarter. The vacancy rate fell from 21.1 percent at midyear to 19.5 percent in the third quarter.

A total of 271 multi-tenant Calss A and B buildings in Westchester County were surveyed.
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Title Annotation:Westchester County, New York real estate
Publication:Real Estate Weekly
Date:Oct 12, 1994
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