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News release

STAMFORD, CT

Jones Lang LaSalle Sees Rebound in Number of Larger Deals in Westchester County

Strong activity pushes down vacancy rates in many office submarkets throughout Westchester County, NY; leasing velocity keeps rents stable in first quarter of 2013


STAMFORD, CT, April 22, 2013 — Jones Lang LaSalle reported that New York’s Westchester County real estate market saw a rebound in the number of new and larger office leases in the first quarter of the year, pushing down vacancy rates in many of the county’s office submarkets. The strong leasing activity kept average asking rents stable throughout the county.

“Activity during the first quarter of the year involved a bit of musical chairs, which is not uncommon for this market,” said Chris O’Callaghan, managing director and Westchester County market lead for Jones Lang LaSalle. “While the activity helped to boost leasing volume compared with levels we saw one year earlier, the transactions did not result in substantially greater net absorption levels. At the same time, the first three months of this year showed a rebound in new and larger leases compared with heavy renewal activity during 2012. The shift towards relocations rather than renewal signals more business confidence as local tenants are more willing to consider the upfront capital associated with moving.”

Although vacancy rates fell in all building classes in a majority of submarkets in the first quarter of the year, overall vacancy rates in Westchester County were weighted down by large blocks of newly-available space in the White Plains CBD and Westchester North submarkets. The county’s overall vacancy rate remained unchanged at 18.5 percent in the first quarter of 2013. The Class A vacancy rate rose slightly to 20.5 percent this quarter, increasing 2.5 percent (or 0.5 percentage points) from the Class A vacancy rate of 20.0 percent in the fourth quarter of 2012.

Westchester County posted an increase in overall average asking rental rates for the second consecutive quarter. Overall rents rose to $26.09 per square foot in the first quarter of 2013, an increase of 1.4 percent from overall rents of $25.74 per square foot the previous quarter. Rates for the county’s Class A properties fell slightly to $26.91 per square foot this quarter, a drop of less than 1.0 percent from Class A rents of $26.94 per square foot in the fourth quarter of 2012.

Following a strong end to 2012, leasing velocity during the first quarter of the year in Westchester County slowed considerably to levels more characteristic of the market in recent years. Compared to the first three months of 2012, however, volume was up 7.6 percent to nearly 550,000 square feet.

Furthermore, while activity during 2012 was weighted heavily toward renewal activity, the first three months of this year showed a rebound in new and larger leases, which is a positive shift for the market. Fewer transactions were completed during that time than the same period of a year ago, but the increase in deal size resulted in increased absorption.

Characteristic of this market, many of the new transactions were executed by existing Westchester tenants, so while some submarkets will benefit from positive absorption, others will see some large vacancies materialize. Renewals still accounted for a good share of transactions, but were concentrated in smaller deals.

The top five transactions closed in the first quarter were all new deals, including Xylem Inc.’s lease at 1 International Drive in the I-287 East Corridor submarket. Other large new transactions included:

  • Argus Information & Advisory Services’ sublease of 50,531 square feet at 1 North Lexington Avenue in the White Plains CBD/Railroad submarket;
  • Mindspark’s move to 35,500 square feet at 29 Wells Avenue/iPark in the Westchester South submarket;
  • Verizon’s commitment to 29,756 square feet at 500 Summit Lake Drive in the I-287 West Corridor submarket; and
  • Quorum Federal Credit Union’s relocation within its current submarket to 21,855 square feet at 2500 Westchester Avenue in the I-287 East Corridor.

The White Plains CBD posted an increase in vacancy rates in the first quarter of the year, as sublease space at 10 Bank Street was added to the market. The overall vacancy rate rose slightly to 21.6 percent in the first quarter of 2013, an increase of less than 1.0 percent (or 0.2 percentage points) from the overall vacancy rate of 21.4 percent the previous quarter. The submarket’s Class A vacancy rate grew to 23.7 percent this quarter, a rise of 6.3 percent (or 1.4 percentage points) from the Class A vacancy rate of 22.3 percent in the fourth quarter of 2012.

Average asking rental rates for Class A space in the White Plains CBD dropped this quarter, driven down by the discounted sublease space available at 10 Bank Street. Overall rents in the White Plains CBD rose to $28.79 per square foot in the first quarter of 2013, an increase of 1.2 percent from overall rents of $28.45 per square foot the previous quarter. Rates for the submarket’s Class A product fell to $29.39 per square foot this quarter, a drop of 2.4 percent from Class A rents of $30.10 per square foot in the fourth quarter of 2012.

Due to significant leasing activity along the I-287 East Corridor, vacancy rates declined in all building classes for the third consecutive quarter. In the largest deal so this year, Xylem Inc. signed for 67,145 square feet at 1 International Drive, relocating to the I-287 East Corridor from within Westchester County. The overall vacancy rate fell to 17.5 percent in the first quarter of 2013, a decrease of 4.9 percent (or 0.9 percentage points) from the overall vacancy rate of 18.4 percent in the fourth quarter of 2012. The submarket’s Class A vacancy rate dropped to 18.7 percent this quarter, a decrease of 4.1 percent (or 0.8 percentage points) from the Class A vacancy rate of 19.5 percent in the fourth quarter of 2012.

The heavy interest from space users in I-287 East Corridor office space drove up average asking rents for all building classes in the first quarter of the year. Overall rents rose to $27.71 per square foot in the first quarter of 2013, an increase of 2.8 percent from overall rents of $26.95 per square foot the previous quarter. Rates for the submarket’s Class A product grew to $27.72 per square foot this quarter, an increase of 2.4 percent from Class A rents of $27.07 per square foot in the fourth quarter of 2012.

JLL is a leader in the New York tri-state commercial real estate market, with more than 1,750 of the most recognized industry experts offering brokerage, capital markets, property/facilities management, consulting, and project and development services. In 2011, the New York tri-state team completed approximately 15.9 million square feet in lease transactions, arranged capital markets transactions valued at $1.57 billion, managed projects valued at more than $6.8 billion, and oversaw a property and facilities management portfolio of 63.6 million square feet and an agency leasing portfolio of 49.8 million square feet.

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet. Its investment management business, LaSalle Investment Management, has $47.0 billion of real estate assets under management. For further information, visit www.jll.com.