Bright spots in Westchester/Fairfield - Westchester County, NY and Fairfield County, CT - Real Estate Investment Section

Bright spots in Westchester/Fairfield

Fairfield County demonstrated its appeal to corporate residents with active leasing in the third quarter. Yet, overall vacancy rates for the county decreased less than one percentage point to 25.3 percent as a result of a number of corporate relocations outside the area and the continued trend of downsizing among businesses in general. Two examples of companies leaving the area are UPS and Richardson-Vicks. The latter departure is due to Procter and Gamble's consolidation in Ohio.

Vacancy rates are expected to continue to decline through the end of 1991 as there is virtually no new construction. Although the quarter did not see a large influx of companies from other parts of the country, a number of companies expanded their current office space within the county, affirming their commitment to stay here.

Seven of the largest transactions executed in the county this quarter were by companies already situated here who decided to expand their space. For example, in Westport, the Managed Care Services Group of Metropolitan Life leased 60,000 square feet and Phibro Energy, Inc. leased 113,000 square feet. These large transactions allowed the vacancy rate to drop approximately 10 percentage points in Westport. Other area companies who expanded their square footage in Fairfield County included IMRS. Inc. who leased 73,558 square feet in Stamford and Deloitte & Touche who leased 52,222 square feet also in Stamford.

Class A space continues to be absorbed at a much higher rate than class B, narrowing the choices for large users needing big blocks of space. Asking rents remained virtually stable in the county this quarter with the overall asking rent average at $21.95, Class A space at $23.35 and class B at $17.25.

Cushman & Wakefield is tracking more than 1 million square feet for potential users actively seeking locations within Fairfield County - and this does not include Morgan Stanley. This county is a strong candidate for both corporate relocation and expansion of the economically diverse firms we already have entrenched here. We are seeing more and more businesses expand their square footage within the county.

The vacancy rate and reduced prices of commercial office buildings demonstrate a much-needed adjustment of the market, similar to the stock market's reaction to inflated prices. In other words, Fairfield County has had to apply the brakes in commercial real estate. I believe the result will be opportunity for buyers to enter the market at a reasonable rate and tenants to lease space in a manner that makes sense for them. Within the next two years, we will see the market stabilize, and vacancy rates recede to below 20 percent.

Lately, when anyone talks about Connecticut, they mention the new income tax. Frankly, I have not heard of any serious backlash from either developers or brokers or for that matter, potential Connecticut corporate residents. Fairfield County will still attract new firms from outside the region as well as keep many of its diverse businesses from relocating elsewhere.

Major Transactions in the Third Quarter: *Tenant Phibro Energy, Inc. for 113,000 square feet in Wesport *IMRS, Inc. for 73,558 square feet in Stamford *Metropolitan Life for 60,000 square feet in Wesport *Deloitte & Touche for 52,222 square feet in Stamford *Southern New England Telephone for 42,000 square feet in Shelton *Westinghouse Corporation for 27,630 square feet in Shelton *Versyss, Inc. for 24,000 square feet in Shelton

Westchester County

Westchester maintained a steady rate of leasing activity in the third quarter. The overall vacancy rate rose one percent over last quarter to 16.7 percent This rise is attributable to the over 300,000 square feet of sublease office space which recently came up onto the market. Nestle's will vacate 280,000 square feet in Purchase and New York Telephone vacated 90,000 feet in Rye Brook. However, MCI has chosen to expand their space in Westchester and has subleased 30,000 square feet at the New York Telephone site.

With its proximity to New York City and attractive lifestyle, Westchester will continue to be a target for corporate relocation and expansion. However, like Fairfield County and many other places in the nation, prices for leasing and purchase are undergoing a much-needed downward adjustment. It is difficult for developers/landlords and many banks and institutions to weather the changes, but they are vital to the economic health of the community.

Asking rents have declined slightly this quarter demonstrating landlord's willingness to adjust their thinking and make expectations more realistic in order to compete for fewer transactions. In addition, landlords continue to "beef up" their amenities packages by offering child and health care facilities. Asking rents averaged $21.12 overall, $21.72 for Class A space and $19.62 for class B space.

The majority of deals in Westchester remain in the 5,000- square-foot range. However, there are exceptions; Regeneron Pharmaceutical has just expanded and leased 84,438 square feet in Tarrytown. Just three years ago, this company began with about 10,000 square feet and now they occupy approximately 138,000 square feet in Westchester. They could have chosen Long Island or New Jersey but found Westchester the most advantageous.

The current real estate market continues to offer excellent opportunities for investors. Often banks and institutions, who have taken over properties are anxious to dispose of them quickly. This new trend can lead to some tremendous opportunities for investors.

An example illustrating investment opportunity in Westchester is the sale of 200 Business Park Drive, a 89,331-square-foot office building situated on 8.2 acres in Armonk. This site was purchased by 200 Business Park Associates at an advantageous price, allowing the investment group to offer commercial space in a Class A building at better than typical asking rents. The building is filling quickly and producing revenue which allows the new owners to make a profit.

At 16.7 percent, Westchester has some of the lowest vacancy rates in the country. I believe this will remain true in the future as Westchester continues to attract both large and small tenants to its many advantageous commercial real estate locations.

Major Transactions in the Third Quarter: *Regeneron Pharmaceutical for 84,438 square feet in Tarrytown *Cablevision for 28,000 square feet in Yonkers *The Limited for 25,000 square feet in Scarsdale *Conrans for 22,000 square feet in White Plains

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