Stepped-up tenant activity in the first half of this year in Westchester County”™s office market slowed in the third quarter, although brokers and researchers foresee big deals ahead in a promising market in which three companies are shopping for office space of more than 100,000 square feet.
Jones Lang LaSalle Inc.”™s Stamford office reported 450,916 square feet of office space leased in the county from July through September, a steep drop from second-quarter leasing activity that totaled 731,048 square feet of space. Third-quarter leasing volume was not far below the 488,474 square feet leased in the first quarter this year, according to JLL.
Researchers at Newmark Grubb Knight Frank noted the surge in second-quarter activity this year was boosted by one of the county”™s major employers, Purchase-based PepsiCo Inc., which leased approximately 361,000 square feet of space at 1111-1129 Westchester Ave. After nine months, leasing activity in the county already has exceeded the leasing volume for all of last year, according to NGKF.
Of the top 10 leases signed in the third quarter, six were tenant renewals, while three were relocations within Westchester and one was a new lease, JLL reported.
Newmark Grubb Knight Frank said renewal deals totaled roughly 200,000 square feet in the third quarter, a nearly 31 percent increase from the previous quarter. Subleases accounted for less than 20,000 square feet of office space leased in the third quarter.
About 6.4 million square feet of office space was available for leasing at the close of the third quarter, or 23.1 percent of the total county office market, according to NGKF. That was a slight decline in availability from the first half of the year.
On a yearly basis, the county”™s available office space this fall was up from 21.4 percent in the third quarter of 2014, NGKF said. That was a result of PepsiCo”™s decision early this year not to renew its lease at its 540,000-square-foot bottling division headquarters in Somers. The food and beverage giant is relocating its northern Westchester operations and employees to its White Plains and Purchase facilities.
Jones Lang LaSalle reported 22.8 percent of Westchester”™s overall office space was vacant in the third quarter, up from 21.1 percent in the third quarter last year. The vacancy rate for Class A buildings was higher at 25.6 percent, up from 22.8 percent in the third quarter last year, according to JLL.
Overall rents in Westchester fell to $24.27 per square foot in the third quarter, down from $25.69 per square foot a year ago, according to JLL. Average rents for Class A space dropped to $25.40 per square foot for the quarter, down from $26.67 per square foot in the third quarter last year.
The county”™s Interstate 287 corridor dominated third-quarter leasing activity, accounting for all but one of the seven larges deals signed in the quarter, according to JLL. The I-287 submarket accounted for about 65 percent of all third-quarter leasing in the county.
Tenant interest in that central office-park corridor shows no signs of waning. More than 75 percent of tenants looking for office space in Westchester have said the I-287 corridor is their preferred location, according to JLL.
AmeriPath Inc., which provides medical diagnostic services to physicians and health care facilities, signed the largest lease of the third quarter, taking 51,054 square feet at 100 Midland Ave. in Port Chester.
Tenants signing other notable deals in the quarter included:
Ӣ Leukemia & Lymphoma Society, leasing 41,868 square feet in a relocation to 3 International Drive in Rye Brook.
Ӣ OӪConnor Davies LLP, for 35,580 square feet at 500 Mamaroneck Ave. in Harrison.
Ӣ Commerzbank AG, 31,520 square feet at 6 International Drive in Rye Brook.
Ӣ PepsiCo Inc., 39,075 square feet at 3 Skyline Drive in Hawthorne.
Christopher O”™Callaghan, managing director and Westchester market lead in JLL”™s Stamford office, said brokers expect increased tenant demand to continue into 2016. “Westchester County”™s efforts to reposition older commercial office buildings will help tighten the Class A market throughout the area, although there will still be a bit of an oversupply,” he said.
Researchers at Newmark Grubb Knight Frank said tenants with office space needs totaling 1.3 million square feet are active in the county market. With multifamily residential developments booming in Westchester and the market”™s vital health care sector expected to awaken from a dormant period, the county”™s market outlook entering the fourth quarter “appears promising,” analysts said.
