WESTCHESTER/FAIRFIELD OFFICE MARKET Vacant space decreases in Fairfield County

REAL ESTATE OUTLOOK
WESTCHESTER/FAIRFIELD
OFFICE MARKET
THIRD QUARTER 2014
Vacant space decreases in Fairfield County
Westchester County saw another quarter of negative net absorption
The third quarter of 2014 saw opposite trends in Fairfield and Westchester
County regarding vacancy rates. While the vacancy rate in Fairfield County
decreased by 39 basis points, the same cannot be said in Westchester County,
where it increased by 87 basis points. The average rental rates in both counties
remained stable.
ECONOM Y
Economy grew at 4.6% in second quarter of 2014
According to the third estimate released by The Bureau of Economic Analysis,
the real GDP grew 4.6% in Q2 2014. This is due to an increase in exports of
nondurable industrial supplies & material and nonfarm inventory investment by
motor vehicle dealers. The national unemployment rate in Q3 2014 was 6.1%,
10 basis points lower than Q2 2014. Professional and business services, retail
trade and healthcare saw major job growth during the quarter.
Connecticut saw an increase in nonfarm jobs of approximately 7,500 in Q3 2014.
This is the second consecutive quarter of positive job growth after a decrease
in jobs created in Q1 2014. Connecticut’s unemployment remains above the
national unemployment rate although it’s seen a large decline from 6.8% in
the second quarter to 6.5% in the third quarter of 2014. The highest increase
in jobs was seen in the leisure and hospitality sector followed by trade and
transportation over the last year. Financial activities and manufacturing saw a
slight decrease in the job growth.
VAC A N C Y
Vacancy rates moved with a margin of 100 basis points across markets
Continuous leasing activity along with no new supply led to a decrease in
vacancy rates in the Fairfield County. As a result, the vacancy rate dropped 39
basis points to reach 16.15% in Q3 2014. Westchester County still saw sluggish
growth and tenant activity in Q3 2014 and as a result, the vacancy rates climbed
higher during the same period. The vacancy rate in Westchester County
increased by 87 basis points and reached 15.2% in Q3 2014.
T RENDL INES
5- YE A R TR E ND
C U R R E NT Q UART E R
W E S T C H E S T E R VAC A N C Y
15.2%
Vacancy rate increase
by 87 bps
FA I R F I E L D VAC A N C Y
16.2%
Vacancy rate drops by
39 bps
WESTCHESTER ABSORPTION
-220,839 SF
Absorption rate
continue to drop
FA I R F I E L D A B S O R P T I O N
132,700 SF
13% drop in
absorption rate
WESTCHESTER ASKING RENTS
$27.29 PSF
Asking rents remain
stable
FA I R F I E L D A S K I N G R E N T S
$34.79 PSF
Rents increase by
1.1% remaining stable
WESTCHESTER/FAIRFIELD
OFFICE MARKET
THIRD QUARTER 2014
ABSORPTION
Drop in absorption across counties
Leasing activity in the third quarter was subdued in both counties as compared to the Q2 2014. Most of the transaction
activity was renewals. Fairfield County witnessed absorption of 132,700 SF, a 13% decrease over the earlier quarter.
Westchester County also witnessed its third consecutive quarter of negative net absorption. Job growth occurred in leisure,
hospitality and retail rather than non-office using sectors, reflecting subdued demand for office space despite increasing job
numbers. The total net absorption in Westchester County was negative 220,839 SF.
Notable Lease Transactions
UNEMPLOYMENT RATE
CONNECTICUT
UNITED STATES
COMPANY
ADRESS
SQUARE FEET
LEASE TYPE
XL Global Services
2 Harbor Point
Stamford CT
23,919
New Lease
Collier Halpern
Gateway 1
White Plains, NY
20,000
Renewal
10%
8%
6%
4%
R E N TA L R AT E S
2%
0%
Stable rental rates across markets
05
06
07
08
09
10
11
12
13 14YTD
SOURCE Bureau of Labor Statistics
PAYROLL JOB GROWTH
CONNECTICUT
UNITED STATES
4%
2%
0%
Sluggish leasing activity along with no new supply led to rental rates remaining
stable in the third quarter of 2014. The average asking rental rate in Q3 2014
in Westchester County was $27.30 PSF. In Fairfield County the average asking
rental rate was $34.80 PSF, a 1.1% increase from the earlier quarter. Unless there
is a sudden increase in demand for office space, we do not expect the rates to
rise significantly in the fourth quarter of 2014. Connecticut still lags behind in job
growth in the office-use sector, in fact certain sectors like finance and insurance,
utilities and employment services are witnessing a drop in job numbers over the
last year. The office sector always follows at approximately a six to eight month
lag to employment growth.
-2%
-4%
05
06
07
08
09
10
11
12
13 14YTD
SOURCE Bureau of Labor Statistics
P R O J E C T D E L I V E R E D/ U N D E R C O N S T R U C T I O N
No new project delivered in Q3 2014
No new projects were delivered in Q3 2014 in Fairfield and Westchester County.
However, 164 Mount Pleasant Rd - Building 1, a new medical office building, is
expected to be delivered in December 2014 in Fairfield County. n
CONTACT
Palak Raval
Researcher
212.537.7701
[email protected]
METHODOLOGY
Chase Bourdelaise
Director of Research
617.439.9313
[email protected]
The information in this report is the result of a compilation of information on office
properties located in Manhattan. This report includes single-tenant, multi-tenant and
owner-user Class A & B office properties 20,000 SF and larger.
67 Holly Hill Lane
Greenwich, CT 06830
T 203.637.9300 F 203.698.1022
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