Despite a first-quarter decline in office rents in Westchester County and a slight rise in the overall vacancy rate, brokers at Jones Lang LaSalle”™s Stamford office see encouraging signs in Westchester”™s commercial office market, with leasing activity at its highest in nearly two years and tenants in the market for a total of 700,000 square feet of office space.
The White Plains Central Business District led the county in leasing velocity, accounting for a little more than 32 percent of all deals closed in the first quarter. The legal and financial services sectors accounted for 55 percent of all first-quarter leasing in White Plains, according to JLL.
Jones Lang LaSalle reported approximately 488,000 square feet of space was leased in first-quarter deals, a nearly 70 percent increase from the approximately 286,000 square feet leased in the fourth quarter last year. Lease renewals accounted for nine of the top 10 leases by square footage. Nearly one-third of those renewals included expansions by tenants.
The largest deals closed in the first quarter were Hudson Health Plan”™s lease for 57,315 square feet of headquarters space at 303 S. Broadway; Pure Insurance Co.”™s lease of 43,948 square feet at 44 S. Broadway in White Plains; and FedEx Corp. leasing 36,500 square feet at 669 S. Third Ave. in Mount Vernon.
Yet the county ended the quarter with 51,400 additional square feet of office space available on the market, a negative absorption that JLL said was due to space opening up at 555 Taxter Road in Elmsford and 1 N. Broadway in White Plains.
The county”™s overall first-quarter office vacancy rate was 21 percent, up slightly from the 20.8 percent vacancy rate recorded by JLL in the first quarter of 2014. Vacancies in the county”™s Class A buildings rose to 23.1 percent in the first quarter this year from 22.7 percent a year ago.
Average rent for Class A space dropped to $25.40 per square foot in the first quarter, a 7.2 percent drop from $27.37 per square foot a year ago. Average rents for all office property classes in the county similarly declined, from $26.43 in the first quarter of 2014 to $24.45 per square foot in the first three months this year.
Leading the county in leasing velocity for the first time since 2010, the White Plains Central Business District ended the first quarter with 45,463 square feet of available space absorbed by leasing, according to JLL. The CBD”™s overall vacancy rate dropped to 23.7 percent in the first quarter from 25.8 percent one year earlier, while the Class A vacancy rate fell to 24.6 percent from 25.9 percent in the first quarter of 2014.
Average rents, however, dropped in the CBD despite the stepped-up leasing. Overall rents fell 8.5 percent from a year earlier to $26.27 per square foot in the recent first quarter. Average rents at Class A offices dropped to $28.01 per square foot from $30.50 per square foot in the first quarter of 2014.
JLL said approximately 634,000 square feet of new office space is under construction this spring, all of which is preleased. The projects include Regeneron Pharmaceuticals Inc.”™s approximately $100 million, 300,000-square-foot expansion into two new lab and research buildings on the Landmark at Eastview campus in Mount Pleasant and PepsiCo”™s $243 million, 252,000-square-foot renovation project at its Anderson Hill Road headquarters in Purchase.
Chris O”™Callaghan, Jones Lang LaSalle managing director and Westchester market lead in the firm”™s Stamford office, in the report said the Westchester office market “remained static” in the first quarter. Â “With no new product coming online, and continued repositioning of older office buildings for adaptive reuse or renovation, rents have stabilized,” he said.
