Annual office leasing activity in Fairfield County reached the second highest total on record, while early momentum in Westchester County slowed by year’s end, according to Colliers International Group Inc.(NASDAQ:CIGI, TSX:CIG). The global commercial real estate services firm’s Stamford-based research team today released its fourth quarter 2017 Office Market Snapshots for the two regions.
The County’s leasing activity for 2017 reached the second highest total on record at 4.1 million square feet, just 8.4 percent less than the highest total registered in 2015. Availability dropped for the fourth consecutive quarter, settling at 23.3 percent.
“While steady improvement has been made, the availability rate this year is still 100 basis points (bps) higher than in 2016 as the market struggled to absorb the space given back by Starwood and others early in the year,” said Sean Cullen, Director of Research for Colliers’ Stamford office. “Asking lease rates remained steady during 2017, rising just 1.1 percent to $36.09 per square foot year-over-year.”
Cullen noted that the fate of the 1.2 million-square-foot Matrix Corporate Center in Danbury, now being marketed for sale with re-development potential, will have a significant impact on the overall market in 2018.
While the availability rate in the Eastern Fairfield County submarket declined by 20 bps from the previous quarter to 17.7 percent, falling asking lease rates and limited leasing activity reflected a lack of momentum throughout 2017. Cities like Bridgeport have been revitalizing their urban centers, but the office market has yet to reap the benefits.
Fourth-quarter availability in the Central submarket fell 180 bps to 22.0 percent, due primarily to the 82,851-square-foot sublease inked by ASML at 60 Danbury Road in Wilton. This helped push total leasing activity to 205,429 square feet, beating the trailing five-year quarterly average by 9.3 percent. However, asking lease rates have not responded accordingly, dropping 7.2 percent year-over-year to $30.21 per square foot.
The Greenwich submarket had a strong recovery after a bumpy start to the year. The quarterly total of 326,999 square feet of leasing was the highest on record, fueled by Interactive Broker’s 162,296-square-foot renewal and expansion at 1-3 Pickwick Plaza. As a result, the availability rate fell 180 bps to 19.0 percent and asking lease rates surged 7.2 percent, ending the year at $70.02 per square foot.
The fundamentals in the Stamford Non-CBD district have remained stable year-over-year, and the Stamford CBD saw healthy leasing activity, which helped push the annual total to the second highest on record. However, availability rose by 150 bps from the previous quarter, primarily due to the marketing of Charter Communications’ former headquarters at 400 Atlantic Street. Completion of their new 500,000-square-foot space will have a positive impact on the availability rate in the future.
The Northern submarket continued to improve in 2017 despite a lack of blockbuster deals, defying the much touted “urbanization” trend. The availability rate dipped for a third consecutive quarter, falling to a County-wide low of 16.6 percent.
“Westchester County’s office market started the year with a bang, with several large occupiers signing new leases,” noted Cullen. “However, this early momentum slowed considerably in the second half of 2017, with the fourth-quarter availability rate ending at 22.2 percent, up 20 basis points (bps) from the previous quarter.”
While full-year leasing was 21.4 percent higher and asking lease rates were steady, fourth quarter leasing activity was limited. Only 339,851 square feet of leases were signed, down 19.5 percent from 2016.
ENT Allergy & Associates’ 38,128-square-foot lease at 660 White Plains Road in Tarrytown represented Westchester County’s largest fourth-quarter office lease. Other notable transactions included the 31,520-square-foot lease renewal by Commerzbank Disaster Recovery at I International Drive and Teladoc’s renewal and expansion to 21,118 square feet at 2 Manhattanville Road, both in the East I-287 submarket.
- In Northern Westchester, availability ticked up 90 bps to 37.7 percent, the highest rate recorded in the submarket. It should be noted that the former IBM campus in Somers accounts for 41.0 percent of the total available space (the rate would drop to 22.0 percent without it). The average asking lease rate has remained stable, falling a few cents from last year to $24.91 per square foot.
- The Southern submarket continues to be the most competitive in Westchester. Asking lease rates climbed 8.0 percent year-over-year to $25.24 per square foot, while the availability rate dropped 240 bps to 12.0 percent, the lowest rate in the County. Limited product, particularly Class A space, coupled with occupiers seeking low cost options close to urban centers have contributed to the tight conditions.
- In the East I-287 submarket, the repurposing of obsolete office properties helped drive the availability rate down 270 bps from last year to 17.7 percent, while asking lease rates appreciated by 2.0 percent year-over-year to $27.99 per square foot. However, total leasing activity was less than half of the trailing five-year quarterly average, with just 98,486 square feet signed.
- Leasing activity was healthy in the West I-287 submarket, where the ENT Allergy & Associates lease helped boost the total to 94,824 square feet. The availability rate fell 210 bps from 2016 to 22.1 percent in 4Q 2017, in line with trends in recent years. If approved, the proposed repurposing of the mostly vacant 555 White Plains Roadoffice property will likely have a significant impact on the submarket in 2018.
- While the availability rate in the White Plains CBD rose just 10 bps to 17.4 percent, this marked a substantial improvement over 2016’s rate of 25.6 percent. Pricing has adjusted down throughout 2017, it still holds a 7.9 percent premium to last year at $32.92 per square foot. With just three properties marketing space of 100,000 square feet and greater, little room remains for blockbuster deals in the near future.
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