Commercial office tenants and building owners in Westchester County closed 82 deals for new or renewed leases in this year’s first quarter, up 26 percent from the county’s dealmaking pace at the close of 2016.
Yet continued demand from companies for smaller space under 5,000 square feet served to reduce the volume of leasing activity for the quarter to 475,000 square feet, a 17.8 percent drop from the previous quarter and a 19.7 percent decrease from the first quarter of 2016, according to market researchers at Newmark Grubb Knight Frank.
New leases accounted for 300,142 square feet of first-quarter leasing volume in Westchester, a 27 percent decline from last year’s fourth quarter, researchers at CBRE Inc. in Stamford reported.
Despite companies’ smaller space needs, the total available office space on the Westchester market was trimmed by deals made from January through March. Newmark Grubb Knight Frank (NGKF) said the county saw a net increase of 76,524 square feet of occupied space in the quarter. CBRE reported a higher net absorption of available space totaling 109,532 square feet. It was the third consecutive quarter that the Westchester market saw more office space filled than was added to the market by vacating or downsizing tenants, according to CBRE.
The county’s office availability rate for Class A and Class B office buildings was 23.8 percent at the end of the first quarter, compared with 24.4 percent in the previous quarter and 21.9 percent in the first quarter of 2016, NGKF reported. Of the county’s Class A office inventory, which includes about 22.5 million square feet of space, 25.4 percent was available in the first quarter. The county’s much smaller Class B office market of about 5.2 million square feet had a 16.9 percent availability rate, according to Newmark.
Colliers International Group Inc. reported a lower overall first-quarter availability rate of 19.6 percent for the entire county in its quarterly office market summary.
“A surge in the repurposing of obsolete office properties in Westchester County had a positive material impact on the market, with a substantial decline in the availability rate and an upward trend in asking rents,” said Jeffrey Williams, executive managing director and market leader at the Colliers office in Stamford.
On the Platinum Mile in the county’s East I-287 submarket, Normandy Real Estate Partners removed from the county’s roughly 27.7 million-square-foot office inventory a total of 178,433 square feet of space at its largely vacated Corporate Park Drive buildings as it moves ahead with mixed-use redevelopment. The availability rate in that submarket continued downward, dropping to 17.6 percent in the first quarter, according to NGKF.
Normandy’s impact on the overall Westchester market, however, was offset at the northern end of the county by IBM Corp., which in 2016 put its 1.2 million-square-foot office complex in Somers on the market and announced plans to vacate the property and relocate employees to IBM’s Armonk campus this spring. A Delaware limited liability company, 294 Route 100 LLC, whose plans for the property were not announced, last September bought the 723-acre IBM campus for $31.75 million. Newmark Grubb Knight Frank said IBM’s listing resulted in a 12.8 percent increase in the northern market’s availability rate, to 40.5 percent in the first quarter.
Although the county saw rental rate increases ranging from 1.3 percent to 5.1 percent across its four other geographical office markets, the addition of less expensive and noncompetitive large blocks of space in the north lowered the county’s direct asking rental rate in the first quarter to $26.91 per square foot. That was the lowest asking rate since the third quarter of 2014, according to NGKF.
In the White Plains Central Business District, however, new lease deals and significant renewals by law firms reduced the first-quarter overall availability rate to 20 percent, down from 25.6 percent a year earlier, according to NGKF. The downtown White Plains Class A market showed the largest availability decrease in the county, dropping to 21.3 percent at the end of the first quarter, down from 27.6 percent last year. Less than 9 percent of Class B office space was available for leasing in the Central Business District, NGKF reported.
Colliers International put the White Plains CBD availability rate at 18.7 percent, the lowest rate since 2006.
The largest new deal of the quarter was New York Life Insurance’s lease of nearly 179,000 square feet of space on the top four floors at 44 S. Broadway, Westchester’s oldest office tower, in the CBD.
Tenant renewals accounted for 49 percent, or 69,408 square feet, of total leasing in the CBD, according to Newmark Grubb Knight Frank. The largest renewals deals involved law firms: Bleakley Platt & Schmidt LLP renewed for 32,804 square feet at 1 N. Lexington Ave. and Greenberg Traurig LLP for 26,356 square feet at 445 Hamilton Ave.
Dating the New York Life Insurance deal as 2016 leasing activity, CBRE researchers said the largest new first-quarter lease was in Valhalla, where USI Insurance Services signed for 32,000 square feet at 100 Summit Drive.
The other largest new deals of the quarter were: law firm Milber Makris Plousadis & Seiden LLP, for 29,753 square feet at 709 Westchester Ave. in White Plains; shopping center owner-operator DLC Management Corp., for 17,500 square feet at 566 Taxter Road in Elmsford, Southern Graphic Systems Inc., for 14,750 square feet at 333 Westchester Ave., and accounting firm CohnReznick LLP, for 13,030 square feet at 10 Bank St. in White Plains.