WPCNR MARKETPLACE. From Cushman & Wakefield, the Office Realty Specialist. October 9, 2009 (Edited): In the White Plains Central Business District (CBD), direct asking rents declined in the third quarter ended September 30,registering $32.35 psf, on par with the $32.32 psf last quarter but down more than $2.00 psf from the $34.66 psf one year ago. The White Plains Non-CBD direct asking rents have remained steady over the last year, averaging $32.22 psf, on par with $32.28 psf last quarter and the $32.16 psf one year ago, according to a news release from Cushman & Wakefield.
Major transactions that occurred during the second quarter included the 52,649-sf lease signed by Con Edison at 100 Summit Lake Drive in Valhalla and Premier Health’s lease for 26,326 sf at 445 Hamilton Avenue in White Plains.
Its third quarter 2009 report for the Westchester County commercial real estate market, showing a continued downward trend across the county, but not significantly down. Top drawer leasing activity of the most attractive office space (Class A), however, decreased significantly this quarter — totaling approximately 160,654 square feet (sf), down from 254,060 sf last quarter and 429,720 square feet last year at this time.
WESTCHESTER COUNTY ECONOMY
Job loss in Westchester County continued at a steady clip in the third quarter, with the county losing an estimated 1,000 jobs per month from May through August. Overall the county has lost approximately 15,000 jobs since the recession began in early 2008. Roughly half of these jobs (43%) are in the office-using sectors. Even with this job loss, the county remains below that for the rest of the nation. Total employment in Westchester County is down about 3.4%, compared with 5.2% for the U.S. as a whole. We expect that as the U.S. economy moves from recession to recovery in late 2009 or early 2010, Westchester County will lag by a quarter or so leading to a recovery in the second half of 2010.
A total of 195,684 sf of space was added to the market inventory this quarter, a 52% decrease over the 408,040 sf added last quarter. Of that space, only 37,495 sf is sublease space, virtually all of which (31,443 sf) came from Pernod Ricard at 777 Westchester Avenue in White Plains. Sublease space, however, represents more than 42% of the available space that’s been added to the market since this time last year.
The overall Class-A space available in the county remained at 4.4 million sf (msf) in the third quarter, but increased by almost 13% from the more than the 3.9 msf available this time last year.
Overall vacancies countywide for Class-A space registered at 20.5%, remaining on par with last quarter’s 20.6% and a substantial rise from the 18.3% vacancy rate of one year ago. Direct space returned to market this quarter came primarily from WCI Communities (24,000 sf) at 115 Stevens Avenue, Valhalla, and Abitibi Consolidated (24,441) at 4 Gannett Drive, White Plains, which relocated out of state.
“While market conditions are still softening, they are more stable than many other markets around the country,” said Jim Fagan, senior managing director and head of Cushman & Wakefield’s Fairfield and Westchester County region. “In the face of declining employment, Westchester County is able to persevere due to its diverse tenant base.”
Direct asking rents for Class-A space countywide at the close of the third quarter averaged $31.42 per square foot (psf), slightly higher from the $31.29 achieved last quarter, but down from $31.96 psf one year ago. Although asking rents are stabilizing, taking rents have decreased by as much as 15% to 30% in the past 18 months and concessions, such as free rent and higher work allowances, continue to increase.
Overall absorption for Class-A space in the county in the third quarter totaled positive 14,602 sf, compared with negative 212,821 sf absorbed last quarter and positive 166,782 in the third quarter 2008.
Mr. Fagan said, “The art of being a great landlord is more important than ever. In a market where the number and size of the tenants are remaining the same or declining, those landlords that can differentiate themselves will succeed.”
INVESTMENT SALES
Two investment sales were executed this quarter: Ardsley Park (410 – 460 Saw Mill River Road), a six-building, 390,000-sf office/laboratory complex in Ardsley, NY, was sold by Purdue Pharma to OSI Pharmaceuticals for $27 million or $69/sf; and 399 Knollwood Road, a 152,030-sf office building in White Plains, NY, was sold by S.L. Green to RPW Group for $20.5 million or $140/sf.
Mr. Fagan added, “We expected 2009 to be a difficult year for investment sales, however, there is money out there,” said Mr. Fagan. “Investors are sitting on the side lines waiting for the market to stabilize for them to feel comfortable enough to re-invest.”
