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News release

​STAMFORD, CT

JLL Reports Continued Retraction in Westchester County Touring Activity

MBIA lease in I-287 East Corridor marks biggest new transaction for submarket since 2012; vacancy rates rise across Westchester County in 1st quarter of 2014


STAMFORD, CT, April 14, 2014 — JLL reported weak touring activity and leasing velocity in Westchester County, N.Y., due to minimal or no growth among critical office-using industries. Downsizing and exits by current businesses elevated vacancy rates throughout the county in the first quarter of 2014.

“Westchester County currently has two new commercial office buildings under construction for Regeneron Pharmaceuticals Inc. totaling 297,000 square feet, and a new 85,000-square-foot medical building for WestMed Medical Group,” said Chris O’Callaghan, managing director and Westchester County market lead for JLL. "This is cause for much optimism, as there has not been this much commercial construction in Westchester County in more than 30 years. At the same time, a notable amount of the county's existing office product is functionally obsolete and not suited to meet the needs of today's space users. The adaptation of many of those buildings to other uses, along with new construction, will define Westchester County over the near term."

Education and health care-related expansion continued to provide Westchester County with growth stories in the first quarter of the year. Demand from both sectors, which has been typically regarded as having little effect on local office fundamentals, has begun to permeate the market, spurring both new construction and adaptive re-use. Neither industry has yet to make a measurable impact on absorption.

The larger transactions signed this quarter were all located in Westchester County’s premier office assets — the same set of buildings that have recorded the lion’s share of activity during the economic recovery. While the top deals were also new transactions, the businesses were not new to the market. So, while transactions absorbed space, they simultaneously created market vacancies in their wake.

Leasing velocity in Westchester County has consistently retracted over the past year, and the first quarter of 2014 proved to be no different, giving market watchers little reason to expect a rebound in transaction activity in the short term. The county posted 306,870 square feet in deal volume in the first quarter of the year, slightly more than half the 591,271 square feet completed 12 months ago.

Westchester County’s overall vacancy rate rose to 20.8 percent in the first quarter of 2014, an increase of 12.4 percent (or 2.3 percentage points) from 18.5 percent one year earlier. The county’s Class A vacancy rate grew to 22.7 percent this quarter, an increase of 10.7 percent (or 2.2 percentage points) from 20.5 percent in the first quarter of 2013.

Overall rents in Westchester County rose to $26.43 per square foot in the first quarter of 2014, an increase of 1.3 percent from $26.09 per square foot one year earlier, as building owners became more bullish. The county’s Class A rents grew to $27.37 per square foot this quarter, an increase of 1.7 percent from $26.91 per square foot in the first quarter of 2013.

White Plains CBD
While the White Plains CBD/Railroad submarket experienced weak touring in the first quarter, the submarket recorded the most sizeable transactions, most of which were new deals or relocations. CohnReznick LLP subleased 13,025 square feet at 10 Bank Street; Divney Tung Schwalbe LLP renewed nearly 10,000 square feet, and the National Action Council for Minorities in Engineering relocated into 8,141 square feet at 1 North Broadway; and Wells Fargo Bank leased 8,054 square feet at 50 Main Street.

The overall vacancy rate in the White Plains CBD rose to 25.8 percent in the first quarter of 2014, an increase of 19.4 percent (or 4.2 percentage points) from 21.6 percent one year earlier. The submarket’s Class A vacancy rate grew to 25.9 percent this quarter, an increase of 9.3 percent (or 2.2 percentage points) from 23.7 percent in the first quarter of 2013. Large blocks came online at a handful of Class A buildings including Jackson Lewis’ former space at 1 N. Broadway and the Argus space at 50 Main Street, and Cerussi & Spring will be vacating 1 N. Lexington Avenue.

Overall rents in the White Plains CBD fell to $28.72 per square foot in the first quarter of 2014, a decrease of less than 1.0 percent from $28.79 per square foot one year earlier. The submarket’s Class A rents rose to $30.50 per square foot, an increase of 3.8 percent from $29.39 per square foot in the first quarter of 2013.

I-287 East Corridor
This quarter, MBIA Inc. signed the largest new lease Westchester County has seen since 2012. The financial services firm inked a deal for 85,000 square feet at Buildings 1 and 2 at the Centre of Purchase in Purchase, N.Y. At the same time, the future of the former MBIA headquarters in Armonk, located in the Westchester North submarket, remains uncertain. So, while the MBIA lease is beneficial to the I-287 East Corridor, the relocation could negatively impact the Westchester North office market.

The overall vacancy rate in the I-287 East Corridor rose to 18.0 percent in the first quarter of 2014, an increase of 2.9 percent (or 0.5 percentage points) from 17.5 percent one year earlier. The submarket’s Class A vacancy rate grew to 19.1 percent, an increase of 2.1 percent (or 0.4 percentage points) from 18.7 percent in the first quarter of 2013.

Overall rents in the I-287 East Corridor fell to $26.36 per square foot in the first quarter of 2014, a decrease of 4.9 percent from $27.71 per square foot one year earlier. The submarket’s Class A rates fell to $26.40 per square foot this quarter, a decrease of 4.8 percent from $27.72 per square foot in the first quarter of 2013.
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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 JLL
JLL (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 $4 billion, JLL operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3 billion square feet and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $47.6 billion of real estate assets under management. For further information, visit www.jll.com.