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News release

Stamford, CT

Jones Lang LaSalle Reports Slow Leasing Volume Drives Up Westchester Vacancy

Expansion of health care services throughout county remains primary source of demand in 4th quarter of 2013


STAMFORD, CT, January 28, 2014Jones Lang LaSalle reported that Westchester County, N.Y., posted lackluster leasing activity in the final quarter of the year, pushing up vacancy rates throughout the county.

"Westchester has seen continued de-leveraging of office product throughout the county,” said Chris O’Callaghan, managing director and Westchester County market lead for JLL. “Landlords are continuing to invest in their buildings’ infrastructure and amenities to make them competitive in today's market. In the past few years, we have also seen the increasing influence of the health care industry on our office market environment. Expansion in health services-related businesses is leading office building owners to repurpose to take advantage of this isolated demand driver, and is even driving construction in the area."

Health care services enterprises continue to be one of the few bright spots for the County’s office market. WestMed Medical Group broke ground on a new office building and health care facility. In addition, White Plains Hospital established a number of satellite medical facilities and will soon begin construction to expand the hospital, and Montefiore Medical Center assumed ownership of Sound Shore Medical in lower Westchester.

Westchester County’s overall vacancy rate rose to 20.2 percent in the fourth quarter of 2013, an increase of 9.2 percent (or 1.7 percentage points) from 18.5 percent one year earlier. The county’s Class A vacancy rate grew to 22.4 percent this quarter, an increase of 12.0 percent (or 2.4 percentage points) from 20.0 percent at year-end 2012.

Despite weak demand fundamentals, a slight increase in overall average asking rental rates occurred during the year, more as a function of higher-quality space coming online than fierce competition for availability. Overall rents in Westchester County rose to $26.53 per square foot in the fourth quarter of 2013, an increase of 3.1 percent from $25.74 per square foot one year earlier. The county’s Class A rents grew to $27.30 per square foot this quarter, an increase of 1.3 percent from $26.94 per square foot at year-end 2012.

Leasing velocity throughout Westchester County retracted considerably in the second half of 2013, likely tied to subdued employment growth and structural local economic challenges. Total activity for the fourth quarter nearly reached 300,000 square feet, slightly lower than the deal volume seen in the previous quarter. Year-to-date leasing, which totaled 1.9 million square feet, was off slightly from the 2.04 million square feet of space leased in 2012.

More than half of the transactions signed in the fourth quarter were new deals or relocations. Among new deals signed in Westchester County this quarter, sublease activity was virtually absent. Renewals represented about a quarter of transactions, on par with previous quarters.

White Plains CBD

After struggling for most of the year, activity in the White Plains CBD/Railroad submarket picked up in the fourth quarter.. Two tenants signed leases at 44 South Broadway, marking the two largest deals completed in Westchester in the final quarter of the year. Jackson Lewis leased 44,713 square feet and the New York State Department of Taxation and Finance signed for 40,331 square feet at the building.

The overall vacancy rate in the White Plains CBD rose to 22.4 percent in the fourth quarter of 2013, an increase of 4.7 percent (or 1.0 percentage points) from 21.4 percent one year earlier. The submarket’s Class A vacancy rate grew to 23.8 percent this quarter, an increase of 6.7 percent (or 1.5 percentage points from 22.3 percent at year-end 2012.

Overall rents in the White Plains CBD rose to $28.97 per square foot in the fourth quarter of 2013, an increase of 1.8 percent from $28.45 per square foot one year earlier. The submarket’s Class A rents fell slightly to $30.02 per square foot, a decrease of less than 1.0 percent from $30.10 per square foot at year-end 2012.

I-287 East Corridor

The I-287 East Corridor recorded a minor increase in vacancy rates in the fourth quarter of 2013, fueled in part by a number of smaller spaces coming online. Compared with recent quarters, velocity and general activity were slightly weaker in the final quarter of the year. With much of the space already occupied in the submarket’s premier assets, there is little to boost fundamentals. Businesses looking for Class A- or Class B+ space are less likely to consider a submarket that is less accessible by train or in office parks with limited amenities.

The overall vacancy rate in the I-287 East Corridor rose to 19.3 percent in the fourth quarter of 2013, an increase of 4.9 percent (or 0.9 percentage points) from 18.4 percent one year earlier. The submarket’s Class A vacancy rates grew to 20.4 percent, an increase of 4.6 percent (or 0.9 percentage points) from 19.5 percent at year-end 2012.

The absorption of premium space in this submarket has hindered any growth in Class A rents. Overall rents in the I-287 East Corridor were virtually unchanged during the year at $27.03 per square foot in the fourth quarter of 2013, an increase of less than 1.0 percent from $26.95 per square foot one year earlier. Likewise, the submarket’s Class A rents were flat at $27.00 per square foot this quarter, a decrease of less than 1.0 percent from $27.07 per square foot at year-end 2012.

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JLL is a leader in the New York tri-state commercial real estate market, with more than 1,600 of the most recognized industry experts offering brokerage, capital markets, property/facilities management, consulting, and project and development services. In 2012, the New York tri-state team completed approximately 23.8 million square feet in lease transactions, arranged capital markets transactions valued at $1.57 billion, managed projects valued at nearly $7.0 billion, and oversaw a property and facilities management portfolio of 102.1 million square feet and an agency leasing portfolio of 76.0 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 and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $46.7 billion of real estate assets under management. For further information, visit www.jll.com.