Medical leasing helped propel the Westchester County office market to what analysts described as a strong third quarter overall, building on steady growth in the first half of the year.
Westchester’s office market recorded 535,813 square feet of total leasing activity during the third quarter, up from 455,866 square feet in the second quarter, a 17.5 percent increase, according to the quarterly report from CBRE Group Inc.
“While market indicators show Westchester County trending in a positive direction for 2017 as a whole, the third quarter was constant when compared to the previous two quarters,” said William V. Cuddy Jr., executive vice president at CBRE’s Stamford office.
The availability rate in the county dropped to 22.4 percent in the third quarter, down from 23.42 percent posted in the third quarter a year ago, according to CBRE. That helped drive up average asking rents, which increased to $28.54 per square foot from $27.81 per square foot last quarter, CBRE reported.
Colliers International Group Inc. also reported Westchester’s overall availability rate at 22 percent in the third quarter, though the firm noted that number was flat from second-quarter availability.
After a strong half-year of office leasing to start 2017, Westchester County’s office market “took a breather in the third quarter,” noted Jeffrey Williams, market leader and executive managing director in the Stamford office of Colliers.
Medical leasing led much of the activity in the county, accounting for seven of the 10 largest deals, according to Colliers.
The largest lease deal last quarter was the Montefiore Health System‘s renewal and expansion for 281,497 square feet of space at South Westchester Executive Park in Yonkers, Cushman & Wakefield reported. Other major medical leases included CareMount Medical PC taking 38,799 square feet at 34 S. Bedford St. in Mount Kisco and Greenwich Hospital signing on for 19,897 square feet of space at 90 S. Ridge St. in Rye Brook, as reported by Colliers. Avison Young reported ENT and Allergy Associates LLP signed a lease for 15,490 square feet at 222 Bloomingdale Road in the White Plains Central Business District.
“The continued strength and growth of the heath care sector bodes well for Westchester,” said James Fagan, Cushman & Wakefield managing principal in Stamford. “The county is seeing an increase in overall leasing demand as medical centers exponentially increase their leasing footprint.”
Cushman & Wakefield reported the county has added 270,477 square feet of occupancy growth and more than 1.1 million square feet in new leasing transactions to date this year.
While the White Plains Central Business District saw a number of large new leases in the first half of the year, Jones Lang LaSalle Inc. noted there are few big blocks of space left in the city’s downtown. Only two buildings in the White Plains CBD can offer blocks of space larger than 50,000 square feet, according to JLL, the Westchester Financial Center at 11 Martine Ave. and 440 Hamilton Ave., which has been approved by the city for a residential conversion.
Even without any new blockbuster deals, Colliers reported, downtown White Plains “continued its streak of being the star performer in Westchester.” Asking rents in the CBD were at $33.58 per square foot in the third quarter, down slightly from the second quarter but up about 4 percent from the same period last year, according to Colliers.
Cushman & Wakefield reported that actual taking rents in the White Plains CBD were up more than 10 percent over the past year, while they remained flat in the county’s suburban markets over the same period.
The northern part of the county remains troubled by the more than 1.6 million square feet of office space vacated by PepsiCo and IBM in Somers. Avison Young reported a 37 percent vacancy in the northern part of the county, more than double that of the county’s next highest region, the East I-287 corridor, which had a 17 percent vacancy rate.
Avison Young reported the county’s overall office vacancy rate at 19.5 percent, unchanged from the second quarter. But the report noted that the county’s vacancy rate would measure at 14 percent if not for the IBM and PepsiCo buildings in Somers.
The East I-287 corridor continued its transition “from the ‘Platinum Mile’ to the ‘Medical Mile,'” according to Colliers. The Greenwich Hospital lease in Rye Brook represented the largest deal in the submarket. While the 17 percent availability rate in the East I-287 corridor matches its second-quarter rate, it is down about 2 percent from the third quarter last year, according to Colliers.
The county’s southern submarket, which saw little third-quarter activity outside of Montefiore’s major renewal and expansion, had the county’s lowest availability rate overall at 12 percent, according to Colliers. Third-quarter asking rents in the submarket were about 4 percent higher than last year’s.
Other third-quarter lease deals included the law firm Eckert, Seamans, Cherin & Mellott, LLC renewing for 20,845 square feet at 10 Bank St. and telecom provider MCI renewing its 19,534-square-foot lease at 1 N. Broadway in White Plains.