For Westchester County’s office market, the first half of 2017 has marked the return of the big deal, according to market researchers in the county. White Plains, in particular, is experiencing growing demand for both Class A and Class B space even as prices seem to be tightening.
Leasing deals below 5,000 square feet have dominated demand in the county’s office market since 2016, according to a report from Newmark Knight Frank (formerly Newmark Grubb Knight Frank). But the number of those smaller deals shrank 23.7 percent during the first two quarters of 2017, while deals for leases of more than 50,000 square feet accounted for 32.4 percent of the total leasing activity in the second quarter. Newmark’s report said transactions in that size range were “nonexistent” last year. Small and midsize deals are down 11 and 27 percent, respectively, during the first half of 2017, according to Newmark. Meanwhile, Newmark reports the volume of large deals has nearly doubled.
The increase in major deals is part of what has researchers at CBRE Group Inc. in Stamford concluding Westchester’s office market is trending in a positive direction. While the 349,929 square feet leased in Westchester’s office market last quarter was slightly below the 351,015 square feet in the first quarter, CBRE researchers pointed to promising signs in the county’s back-to-back quarters of positive net absorption and low availability rates.
“As the year goes on, we anticipate demand continuing to grow and leasing velocity to increase,” said Robert Caruso, senior managing director of CBRE’s Westchester and Fairfield county operations.
Leasing was strongest in the White Plains Central Business District, according to CBRE, where 168,816-square-feet of leases were newly signed or renewed. The White Plains CBD also landed the second quarter’s two largest deals, according to Newmark. The Japanese bank Sumitomo Mitsui Banking Corp. signed on for 101,000-square-feet of office space at 1 N. Lexington Ave. in May and Danone North America signed on for 80,000 square feet at 100 Bloomingdale Road, leaving behind its former headquarters in Greenburgh.
Elsewhere in the county, Ascensia Diabetes Care signed the third largest lease last quarter, for 65,000 square feet at 100 Summit Lake Drive in Valhalla.
Sumitomo Mitsui led a series of newcomers to the county inking office lease deals. About a quarter of the county’s total leasing activity in the second quarter came from companies relocating from outside the county or firms establishing additional offices in Westchester, according Newmark. That includes three out-of-market relocations into one building in the White Plains central business district. Star Brands North America, Matrix Asset Advisors and RWL Water all signed leases totaling about 25,000-square-feet at Empire State Realty Trusts’ 10 Bank Street building, according to Newmark.
“While record pricing in Manhattan is undoubtedly a key factor driving tenants to search for options in the suburbs, it is definitely not the only factor,” Newmark concluded in its report. “For many tenants touring this market, it comes down to a combination of pricing, quality of life and proximity and, most importantly, value.”
The county’s overall availability ended the quarter at 23.4 percent, according to Newmark, a slight drop from the 23.8 percent in the first quarter and 25.1 percent a year ago.
The largest decrease in availability was seen in the White Plains Central Business District’s Class A market, according to Newmark. The city’s downtown office market availability rate for Class A buildings ended the quarter at 18.7 percent, as measured by Newmark, down 7.8 percent from last year’s number. Just 9.1 percent of the Class B inventory in the White Plains central business district is available.
Colliers International Group Inc. reported White Plains CBD overall availability at 17.8 percent, its lowest since 2006. Colliers researchers credited that low availability rate for a 5.8 percent increase in asking lease rates in the CBD, up to $33.89 per square foot.
Newmark noted in its report, however, that a 7 percent cut in average rents for both Class A and Class B properties in the northern part of the county drove down overall weighted asking rents in Westchester. Newmark measured the weighted average rent in the county as $26.49 per square foot, down slightly from $26.92 last quarter and $27 last year.
CBRE measured the county’s overall average asking rents at $27.81 per square foot, noting it remained stable for the 15th consecutive quarter.
Despite the overall decrease in the county’s availability rate, parts of the county saw increases in availability. The largest increase was seen in the Class B market in the northern part of the county, where the availability rate climbed from 21.5 percent a year ago to 29.8 percent in the second quarter, according to Newmark. Availability also increased in the county’s western and southern markets.
Finance, insurance, real estate and professional services remained the county’s leading industries, according to Newmark, driving 61 percent of demand in the first half of 2017. Finance led those categories, driving 28 percent of demand.
Two major industries in Westchester saw declines in demand in the first half of 2017, according to Newmark. Health care declined to only 8 percent of the demand in the first half of 2017, compared with 16 percent the year before. Insurance, meanwhile, captured only 1 percent of activity, compared with 7 percent last year.