STAMFORD, CT—While leasing activity in both markets in the third quarter was significantly higher, the tale of the tape for New York City’s northern suburbs—Westchester County, NY and Fairfield County, CT—was markedly different.
Third quarter leasing volume in Westchester County, driven in large part by the health care and legal sectors, rose nearly 52% in the third quarter as compared to the same period last year, according to a report by Cushman & Wakefield. Year-to-date office space demand was 17% higher than the five-year historical average, thus the positive market forces drove the county’s overall vacancy rate down 340 basis points from the third quarter 2016 to the current 19.4% rate at the end of the third quarter 2017.
A total of 51% of the new lease transactions involved businesses in the health care or legal sectors. The largest deal in the third quarter was Montefiore Hospitals’ renewal and expansion at South Westchester Executive Park in Yonkers for 281,497 square feet.
“The continued strength and growth of the healthcare sector bodes well for Westchester,” says Jim Fagan, managing principal, Cushman & Wakefield. “The county is seeing an increase in overall leasing demand as medical centers exponentially increase their leasing footprint, and office tenants return to suburban markets for the close proximity to urban centers.”
Year-to-date, Westchester has recorded more than 1.1 million square feet of new lease deals, resulting in 270,477 square feet of occupancy growth. C&W states that every submarket in Westchester has seen a year-over-year drop in overall vacancy rates, with the White Plains Central Business District enjoying the largest decline, down 769 basis points to 16.9% at the end of the third quarter.
Strong leasing did little to move the needle on office rents in Westchester, however. Third quarter average asking rents in Westchester were down slightly to $29.24-per-square-foot in suburban Westchester markets and $33.29-per-square-foot in Downtown White Plains. Actual taking rents remained flat in suburban Westchester and increased by more than 10% over the past 12 months in the White Plains CBD, the report states.
Despite leasing activity of 1.7 million square feet so far this year, a 21% increase from the same period one year ago, Fairfield County’s overall vacancy rate rose to 23.6% at the end of the third quarter, a level not reached in more than a decade.
For the third quarter, aggregate office leasing was 555,629 square feet in Fairfield County. Stamford and Greenwich accounted for more than 77% of the total. The largest transactions included Bank of America’s 166,000-square-foot lease at 600 Washington Blvd. in Stamford and AQR Capital Management’s nearly 90,000-square-foot expansion at One Greenwich Plaza in Greenwich.
Fagan notes that the increase in the vacancy rate was predominantly due to Sun Product’s office consolidation that added 82,851 square feet of vacant space at 60 Danbury Road in Wilton and Bridgewater Associates giving back more than 115,000 square feet of space at 10 Westport Road in Wilton. Both changes contributed to the 753,054 square feet of overall negative absorption for the quarter.
Overall average asking rents remained relatively unchanged, dropping $0.83-per-square-foot from one year ago, to $33.78-per-square-foot. On the plus side, Greenwich enjoyed a $4.54-per-square-foot year-over-year increase in its overall average asking rent to $66.02-per-square-foot.