While the COVID-19 pandemic contributed to a slowdown in the Westchester County office market toward the end of 2020’s first quarter, other factors were already at work leading to a slowdown in leasing activity and a significant loss of occupancy, according to a new report by the real estate advisory firm Newmark Knight Frank (NKF).
The NKF report found that leasing activity during the first quarter of the year was down 46.2% from the fourth quarter of 2019 and down 37.6% from the first quarter of 2019. It said all of the leasing activity came to approximately 300,000 square feet.
The report found that Westchester had a negative space absorption of 496,206 square feet, with 380,000 square feet of that coming from PepsiCo at 1111 and 1129 Westchester Ave. in White Plains. That resulted in a 5.1% boost in Class A space availability in that geographic area, from 12.4% in the fourth quarter of 2019 to 17.5% in the first quarter of 2020.
NKF said that there was a decline of leasing activity in the northern and southern market areas in Westchester “where virtually no major leasing took place other than a 14,599-square-foot lease for AMS signed at 480 Bedford Road in Chappaqua.”
NKF said that leasing volume in the White Plains Central Business District went down 48.6% from the fourth quarter of 2019. It said there were 18 transactions resulting in approximately 80,000 square feet of space having been leased. That did not compare favorably with the first-quarter historical average leasing activity of 120,000 square feet.
The NKF report found that there was a healthy demand for space in the West I-287 market area. The 75,000 square feet of space leased there during the first quarter of 2020 represented a sharp increase from the 40,000 square feet of space taken during the fourth quarter of 2019.
The report stated there were 22 transactions during the first quarter, with the majority of them being for less than 5,000 square feet. Exceptions included Aerolase’s new 10,000-square-foot lease at 120 White Plains Road in Tarrytown, the New York State Grievance Committee’s renewal of a 8,300-square-foot space at 399 Knollwood Road and a new 6,000-square-foot lease by Marks, O’Neill, O’Brien, Doherty & Kelly at 580 White Plains Road in Tarrytown.
NKF listed the top lease transactions in the first quarter of 2020 as including 31,182 square feet taken by Derma Path at 1133 Westchester Ave. in White Plains, the AMS lease in Chappaqua, 12,792 square feet for renewal and expansion leased by Interoceanic at 7 Renaissance Square in White Plains and a renewal of 10,000 square feet at 800 Westchester Ave. in Rye Brook by WRNN-TV Associates.
The report said that the full impact of the pandemic on office leasing in Westchester remains to be seen.
“Typically, commercial real estate lags behind the economy by six months, but with an unprecedented number of jobless claims, the effects will likely be felt sooner,” the report said. It pointed to difficulties being encountered in showing space and conducting tours of buildings and said construction projects will likely stall or get delayed. It said only time will tell if major modifications in office layouts will be part of the fallout from COVID-19.