Vacancy rate remains steady
Westchester County”™s commercial office space vacancy rate held even in the third quarter of 2013, helped by several large-scale transactions that balanced the market.
Several different analyses have slightly different figures, based on different methods of defining building classifications and their geographical designations as well as when office real estate deals officially close. But a number of analyses corroborate a market still adapting its existing commercial space to the needs of modern tenants.
Rick Rakow of Rakow Commercial Realty Group shared figures with the Business Journal that tagged the vacancy rate in the county at 13.5 percent compared with 14.8 percent in the third quarter of 2012. Class A vacancies are at 17 percent in 2013”™s third quarter compared with 18.7 percent in the third quarter of 2012.
Still, Rakow said his company focuses less on vacancy than “available” space ”“ those properties that owners are receiving rent on but have been informed that a tenant will be leaving. There is 9 million square feet of available space in the county compared with roughly 6.5 million square feet of vacant space.
Rakow said he felt the vacancy rate was surprisingly low.
“When we bring tenants out into the market, it does not ”˜feel”™ like there has been a lot of absorption,” he said. “It is not uncommon to revisit the same space several times over the course of a year or more with different tenants. A lot of space just sits there.”
Many larger companies continue to shed jobs, Rakow said, and there is nothing on the horizon that will positively change that soon. “Overall, the only thing that is going to move the needle is jobs, jobs, jobs,” he said. “In the meantime, this is a very good time to be a tenant and we are working with many companies who are taking advantage of what this market has to offer them.”
Overall asking rents ended the third quarter at $26.85 per square foot, according to an analysis by Stamford-based CBRE Group Inc. That is a 2 percent increase over last year. Other analyses pegged the rate at similar figures, with Rakow”™s asking rent at $24.97 per square foot, down from $25.13 a year ago.
But figures from Jones Lang LaSalle, a Stamford, Conn.-based specialized real eastate firm, show steady leases and slight decreases in vacancy rates as compared with 2012. The numbers display some consistency in the local real estate market.
The “even keel” gave building owners confidence to raise average asking rental rates, JLL said. Chris O”™Callaghan, the company”™s managing director and Westchester lead, said the area lacks world-class office product and suggested the county should rezone and repurpose along the Interstate 287 corridor.
“Westchester County players have been slow to understand they face global competition for tenants in today”™s market,” he said. “The county needs to prioritize business attraction and retention efforts for the office market to gain some steam.”
JLL”™s report said that Westchester”™s leasing activity dipped in the third quarter to slightly more than 300,000 square feet. There was a pick up in larger scale transactions compared with only one during the previous quarter, according to JLL figures. There has been roughly 1.3 million to 1.4 million square feet of space leased year to date, according to the analyses.
JLL noted that the I-287 east corridor was “the major” player. Among the top 10 transactions in the third quarter, eight were new deals and half were in the I-287 east corridor.