Westchester County”™s office market began 2016 on “solid footing” with 600,000 square feet of space leased in the first quarter, according to researchers at Newmark Grubb Knight Frank in their recent quarterly market report.
Leasing at Class A and Class B office buildings through the first three months of the year was 28 percent above the quarterly historical average in the county and 36.7 percent higher than first-quarter leasing in 2015, according to the commercial real estate services firm.
As it was all of last year, the office market early this year has been dominated by deals involving 10,000 square feet or more of office space. Those larger leases accounted for 72 percent of leasing volume in the first quarter, NGKF reported.
Financial services companies “as usual” were most active in the Westchester market, according to analysts, accounting for 28 percent of leased space in the first quarter. In the largest deals in that industry sector, the Reckson division of SL Green Realty Corp. signed two tenants to expanded leases at Reckson Executive Park in Rye Brook and at 360 Hamilton Ave. in the White Plains Central Business District. Nomura Holdings, a Japanese financial holding company, expanded its space to 51,032 square feet at 5 International Drive in Rye Brook, while Merrill Lynch expanded to 46,122 square feet of space at 360 Hamilton.
In the largest health care industry deal of the first quarter, Hospital for Special Surgery leased 50,000 square feet of space at 1133 Westchester Ave. in White Plains for what will be the Manhattan hospital”™s largest outpatient center in its four-state specialty health care system. Officials at the 153-year-old hospital, a member of the NewYork-Presbyterian Healthcare System, have said a buildout of the office space in the RPW Group building will start in September and the center will open in the fourth quarter of 2017.
Law firms in the county accounted for more than 10 percent of first-quarter leasing activity. The largest deals were lease renewals by Traub Lieberman Straus & Shrewsberry, which expanded into 28,000 square feet at 7 Skyline Drive in Hawthorne, and by DelBello Donnellan Weingarten Wise & Wiederkehr, which re-signed for 27,559 square feet of space at 1 N. Lexington Ave. in downtown White Plains.
NGKF analysts said the countywide office availability rate ”“ which measures the percentage of total vacant and occupied office space being marketed for leasing ”“ dropped slightly to 22.8 percent in the first quarter from its peak of 23.3 percent in the first quarter last year. With fewer new blocks of space up for lease, the county added 20,326 square feet to its occupied office space in the first quarter, after absorbing 35,755 square feet of available space in deals that closed in the fourth quarter of 2015.
Those occupancy gains were “modest” because most tenant demand in the county continues to be driven by large lease renewals rather than new leases, researchers said.
The average direct asking rent by office landlords across the county was $27.05 per square foot in the first quarter, up from $26.86 in the first quarter of 2015 and $26.96 at the end of 2015. For Class A buildings, the average first-quarter asking rent was $27.90 countywide. The White plains Central Business District as usual had the highest average asking rent for submarkets at $32.18 per square foot.
While slow in this year”™s first quarter, investment sales activity is expected to pick up through the rest of 2016, with 14 office properties totaling 1.7 million square feet listed on the market. In addition, Beacon Capital Partners, the Boston-based owner of Westchester One at 44 S. Broadway in White Plains, is said to be “testing the waters for prospective buyers” of the county”™s oldest high-rise office tower.
