JLL reported that the lack of growth within Westchester County’s legal and financial services sectors continued to mute momentum for the county’s office market.
During the past year, vacancy rates continued to inch up and average asking rental rates saw downward pressure throughout the county.
“The Westchester County office market has held steady for quite a while, with little fluctuation in market indicators,” said Chris O’Callaghan, managing director and Westchester County market lead for JLL.
“The legal and financial services sectors have a strong presence in Westchester and those industries tend to have lengthier lease terms and shy away from adding or cutting jobs in large quantities. While the local economy overall has added jobs, the slow rate of growth is hampering the real estate market’s momentum. This market will remain in a holding pattern until there is significant expansion.”
Leasing activity in Westchester County remained lackluster through the final quarter of 2014, with deal volume down 31.6 percent compared with the previous year.
Tenants signed for 1.3 million square feet of office space in 2014, including 286,104 square feet in the fourth quarter, compared with 1.9 million square feet in 2013. Absorption remained negative in 2014 at 225,589 square feet, although that figure was less than half of the 505,255 square feet of negative absorption witnessed in 2013.
The largest transactions completed in Westchester County in the final quarter of the year included Clarfeld Financial Advisors’ 30,000 s/f at 520 White Plains Road in Tarrytown, Acadia Realty Trust’s 29,322 s/f at 411 Theodore Fremd Avenue in Rye and the Legal Aid Society of Westchester’s 26,885 square feet at 150 Grand Street in White Plains.
Renewal transactions continued to drive a large percentage of leasing activity in Westchester County, accounting for 33 percent of the 48 deals signed in the fourth quarter of 2014.
Although the healthcare sector fueled leasing velocity for much of the year, few deals were completed by healthcare firms in the final quarter of the year.
There was no clear winner in terms of business sectors taking Westchester County office space this quarter. The only project under construction in Westchester County at year-end 2014 was the 85,000 s/f 3030 Westchester Avenue in Harrison Executive Medical Park in Purchase. The medical office building has been entirely pre-leased by Westmed Medical Group.
Westchester County’s overall vacancy rate rose to 20.9 percent in the fourth quarter of 2014, an increase of 3.5 percent (or 0.7 percentage points) from 20.2 percent one year earlier. The county’s Class A vacancy rate grew to 22.9 percent this quarter, an increase of 2.2 percent (or 0.5 percentage points) from 22.4 percent in the third quarter of 2013.
Overall rents in Westchester County fell to $24.51 per square foot in the fourth quarter of 2014, a decrease of 7.6 percent from $26.53 per square foot one year earlier. The county’s Class A rents dropped to $25.54 per square foot this quarter, a decrease of 6.4 percent from $27.30 per square foot in the third quarter of 2013.