STAMFORD, CT - Although it was a turbulent first quarter for certain submarkets, Fairfield County’s office fundamentals remained stable while Westchester County saw office leasing activity fall but asking lease rates rise in key submarkets, 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 first quarter 2018 Office Market Snapshots for the two regions.
Despite the County’s stable fundamentals in the first quarter of 2018, it was a turbulent period for certain submarkets.
“The market is still feeling the effects of GE’s consolidation as they formally market their 275,000-square-foot space in the Stamford Non-CBD submarket,” said Sean Cullen, director of research for Colliers’ Stamford office. “However, healthy leasing activity of 832,465 square feet has led to a net increase in availability of just 20 basis points from last quarter. Pricing fell slightly by 1.0 percent to $35.90 per square foot.”
· The Eastern submarket has evolved into one of the most competitive submarkets in the County. The availability rate dropped for the fourth consecutive quarter, falling 340 basis points from the beginning of 2017 to 15.0 percent. However, asking lease rates for the same period have dropped 8.0 percent to $20.56 per square foot, primarily due to lower-priced Class B space being added to the market.
· FactSet’s massive 173,164-square-foot lease at 45 Glover Ave. in Norwalk, which was brokered by Colliers International, will have little effect on the Central submarket’s fundamentals since the company is leaving a similarly sized space in the submarket. However, a variety of smaller occupiers have given back space, adding 200 basis points to the availability rate since last quarter. Nonetheless, asking lease rates have increased 3.0 percent this quarter to $31.10 per square foot.
· Greenwich had a solid performance for the quarter following a strong 2017. Total leasing activity was 71,914 square feet, roughly 43.0 percent lower than the five-year quarterly average, but the net result of this quarter’s activity led to a drop in availability rate of 100 basis points since last quarter and 600 basis points since last year. As a result, the average asking lease rate climbed 6.6 percent year-over-year to $69.33 per square foot.
· Stamford continues to be one of the most attractive submarkets in the area, recording eight out of the top 10 leases this quarter. However, GE’s decision to market their former space in the Stamford Non-CBD has helped drive up the availability rate in the submarket to a record high of 28.4 percent. The Stamford CBD saw its rate drop 80 basis points since last quarter, and asking lease rates improved 5.0 percent year-over-year to $46.50 per square foot, compared to $29.84 per square foot for the Non-CBD.
· After struggling with a glut of newly available space in 2017, the Northern submarket has returned to the more competitive conditions seen in 2016. The availability rate has fallen 90 basis points from last quarter to 15.7 percent, 210 basis points lower than the 2017 peak. Asking lease rates have remained steady, falling by just $0.10 per square foot year-over-year.
The office market in Westchester County was quiet in the first quarter. The availability rate increased 10 basis points from last quarter to 22.2 percent, as leasing activity fell below the five-year quarterly average and there was limited newly available space.
“A variety of occupiers in the market foreshadows a strong 2018,” noted Cullen. “However, uncertainty in the broader economy as well as issues with Westchester’s aging inventory are potential mufflers for the coming quarters.”
· In Northern Westchester, the availability rate fell for the first time in five quarters. However, the drop of 70 basis points from last quarter to 37.2 percent will not have much of an impact on the submarket’s dynamics, since 61.0 percent of available space belongs to the former IBM and Pepsi headquarters’ in Somers and Katonah, respectively. Asking lease rates in the first quarter fell roughly 5.0 percent from the beginning of 2017 to $24.53 per square foot.
· Montefiore’s 22,000-square-foot lease, the largest new lease in the County, helped drive down total availability in the Southern Westchester submarket to 10.7 percent this quarter, the lowest rate since the start of 2008. Asking lease rates jumped 9.8 percent year-over-year to $25.45 per square foot, as owners become more confident and publish previously withheld rates that are higher than the market average.
· In the East I-287 submarket, limited activity combined with the marketing of CBLPath’s 65,000-square-foot space at 760 Westchester Avenue drove the availability rate higher to 18.5 percent. However, the current availability rate remains the second lowest rate in the past decade when compared annually, helping to push the average asking lease rate up 3.6 percent since last year to $28.15 per square foot. This marks the fourth consecutive quarter of pricing gains.
· One of the biggest movers in the West I-287 submarket was Blue Ridge Capital, which recently announced they were shutting down operations and returning roughly 32,000 square feet to the market. Otherwise, fundamentals were essentially flat with a slight increase in the availability rate to 23.5 percent and a $0.05-per-square-foot drop in the average asking lease rate to $25.08 per square foot since last quarter.
· The largest lease in the County, Willis Towers Watson’s 44,713-square-foot renewal at 44 South Broadway, accounted for roughly half of the White Plains CBD’s activity this quarter. After rising 40 basis points from last quarter to 16.6 percent, the availability rate is still the second lowest rate in a decade when compared annually. The submarket continues to be one of the most desirable locations for potential occupiers, contributing to an increase of 2.6 percent in the average asking lease rate since last year to $34.34 per square foot, the highest rate on record since 2010.