According to a report on first quarter 2020 office leasing activity in Westchester from the commercial real estate services and investment firm CBRE, COVID-19 has taken a heavy toll on the industry.
The first quarter of 2020 showed a 44% drop from the activity recorded during the fourth quarter of 2019, with approximately 155,000 square feet of leasing activity. When compared with the first quarter of 2019, the drop was 38%.
CBRE found that several large blocks of space had been added to the market in the eastern section of Westchester, leading to negative absorption countywide of 479,757 square feet. The larger and more expensive blocks added to the market drove average asking rents in Westchester up to $29.19 per square foot, the highest asking rent recorded since the fourth quarter of 2018. The average asking rent for the first quarter of 2020 was 3.7% greater than what it had been in the first quarter of 2019.
The Westchester East submarket saw an 8.6% increase in the asking price for rent to $30.25 per square foot during the first quarter of 2020. This was the highest average asking rent for the submarket since 2011.
Rents in the other Westchester submarkets were essentially stable year over year with approximately 2% increases. The exception was Westchester North, which ended the quarter with asking rents at $26.63 per square foot, 8.3% lower than its post-2010 high of $29.02 per square foot set in the fourth quarter of 2017.
Leases in Class A buildings accounted for eight of the top 10 leases during the first quarter of 2020 and 66% of leasing activity by square feet.
The average lease size during the first quarter of 2020 was 7,600 square feet, a decrease of 43% from the average in the first quarter of 2019. Only two of the leases were for more than 10,000 square feet, with the largest in the first quarter of 2020 being for 14,599 square feet of space.
CBRE said the top five leasing transactions for the first quarter of 2020 were:
Ӣ 14,599 square feet by AMSD Consulting LLC at 480 Bedford Road in Chappaqua;
Ӣ 14,140 square feet by Schott AG at 2 International Drive in Rye Brook;
Ӣ a renewal of 8,587 square feet by Interoceanic Corp. at 7 Renaissance Square in White Plains;
Ӣ 7,506 square feet leased by Slalom Consulting at 1 N. Broadway in White Plains; and
Ӣ a 7,071-square-foot renewal by Ameriprise Financial Inc. at 800 Westchester Ave. in Rye Brook.
CBRE showed that the total market rentable area in the first quarter of 2020 was 26,433,457 square feet with 4,840,173 square feet of space available. The availability rate was 18.3% and the vacancy rate was 17%.
CBRE observed that the U.S. economy may enter a recovery phase in the third quarter assuming COVID-19 peaks this summer and that economic growth could return by year-end.
However, it suggested that recovery of the real estate market will likely lag the overall economy, taking up to three years for all sectors to recover.
