Overall average asking rental rates remain stable, although overall vacancy rates increase in both office markets
STAMFORD, CT, April 18, 2011 — Jones Lang LaSalle announced the Fairfield County, Conn., commercial office market continued to see slowly improving fundamentals in the first quarter of 2011. Although Westchester County recorded strong job growth in many areas this quarter, vacancy rates rose in many of the county’s submarkets. Fairfield County posted stagnant or falling average asking rental rates while Westchester County saw slight rate increases countywide.
Fairfield County
“While economic sentiment in Fairfield County is becoming more positive, a lack of business formation is weighing down the pace of the county’s recovery compared with the national economy,” said Robert Ageloff, international director and head of Jones Lang LaSalle’s Stamford office. “Employment in office-using sectors was down 1.2 percent year over year, but, more positively, the monthly pace of job loss slowed to less than 1 percent. In spite of labor market volatility, the Fairfield County office market appears to be staying on a very slow and punctuated track to recovery.”
The county’s overall vacancy rate dropped slightly to 22.5 percent in the first quarter of 2011, falling nearly 1 percent from the overall vacancy rate of 22.7 percent in the fourth quarter of 2010. The Class A vacancy rate decreased to 21.9 percent this quarter, a drop of nearly 1 percent from the Class A vacancy rate of 22.1 percent the previous quarter. Fairfield County’s Class B vacancy rate slipped to 24.5 percent in the first quarter of the year, a decrease of 2 percent from the Class B vacancy rate of 25 percent at year-end 2010.
Rising amounts of available space throughout Fairfield County in the first quarter of the year put negative pressure on average asking rental rates in many submarkets and property types. Class A rents barely changed, falling to $35.77 per square foot in the first quarter of 2011 from $35.78 per square foot in the fourth quarter of 2011. The county’s Class B rents dropped to $21.55 per square foot this quarter, falling by 1.4 percent from Class B rates of $21.86 per square foot the previous quarter.
Leasing activity in Fairfield County totaled nearly 600,000 square feet in the first quarter of 2011. Stamford claimed three of the top five leases signed this quarter, including Chelsea Piers leasing
41,700 square feet at 1 Blachley Road, the Connecticut Film Center subleasing 40,000 square feet at 650 West Avenue and Cenveo renewing its 34,000 square feet of space at 201 Broad Street.
The Stamford CBD/Railroad submarket posted a vacancy rate increase in all property types in the first quarter of the year. The overall vacancy rate rose to 23.2 percent in the first quarter of 2011, an increase of 2.2 percent from the overall vacancy rate of 22.7 percent in the fourth quarter of 2010. The submarket’s Class A vacancy rate increased to 23.6 percent this quarter, a gain of 2.2 percent from the Class A vacancy rate of 23.1 percent the previous quarter. The Class B vacancy rate grew to 15.8 percent in the first quarter of 2011, a boost of 15.3 percent from the Class B vacancy rate of 13.7 percent at year-end 2010.
Class A rents in the Stamford CBD/Railroad submarket fell to $42.57 per square foot in the first quarter of 2011, dropping 1.3 percent from Class A rates of $43.11 per square foot in the fourth quarter of 2010. The area’s Class B rents increased to $28.30 per square foot this quarter, rising 3.1 percent from Class B rates of $27.44 per square foot the previous quarter.
Although the Greenwich CBD/Railroad area recorded increasing vacancy rates for Class A space this quarter, the submarket posted a major drop in Class B vacancy rates. The overall vacancy rate fell to 19.1 percent in the first quarter of 2011, a drop of 3.5 percent from the overall vacancy rate of 19.8 percent in the fourth quarter of 2010. The Class A vacancy rate rose to 22.1 percent this quarter, rising 7.3 percent from the Class A vacancy rate of 20.6 percent the previous quarter. The submarket’s Class B vacancy rate plummeted to 9.9 percent in the first quarter of 2011, a decrease of 43.8 percent from the Class B vacancy rate of 17.6 percent at year-end 2011.
Class A rents in the Greenwich CBD/Railroad submarket increased to $92.73 per square foot in the first quarter of 2011, rising 1.2 percent from Class A rates of $91.65 per square foot in the fourth quarter of 2010. The area’s Class B rates dropped to $59.88 per square foot this quarter, falling 3.7 percent from Class B rates of $62.18 per square foot the previous quarter.
Westchester County
“Overall payrolls in Westchester County grew at a 1.1 percent year-over-year pace through February 2011, adding nearly 5,000 new jobs to the local economy, with office-using sectors adding nearly 1,000 jobs during the same period,” said Ageloff. “The improvement in the area’s economy is a driver for the local office market, but risks to the county’s continued recovery remain, as the office sector is historically a flat market with limited fluctuation.”
Significant leasing activity in Westchester North helped offset a significant increase in vacancy rates in all property types in the White Plains East submarket. Westchester County’s overall vacancy rate increased slightly to 19.1 percent in the first quarter of 2011, increasing less than 1 percent from the overall vacancy rate of 19.0 percent in the fourth quarter of 2010. The county’s Class A vacancy rate fell to 20.8 percent this quarter, dropping less than 1 percent from the Class A vacancy rate of 20.9 percent the previous quarter. The Class B vacancy rate rose to 14.8 percent in the first quarter of the year, increasing 5.7 percent from the Class B vacancy rate of 14.0 percent at year-end 2010.
Class A average asking rental rates in Westchester County increased to $27.51 per square foot in the first quarter of 2011, rising 1.7 percent from Class A rates of $27.04 per square foot in the fourth quarter of 2010. Class B rents grew to $22.66 per square foot this quarter, increasing 1.9 percent from Class B rents of $22.23 per square foot the previous quarter.
Westchester County leasing activity totaled more than 800,000 square feet for the quarter. Pepsi Bottling’s renewal and expansion at 1 Pepsi Way for the entire 540,000-square-foot building accounted for nearly three-quarters of total activity.
The White Plains CBD recorded rising vacancy rates in all property classes in the first quarter of the year. The overall vacancy rate rose to 20.0 percent in the first quarter of 2011, an increase of 4.2 percent from the overall vacancy rate of 19.2 percent in the fourth quarter of 2010. The CBD’s Class A vacancy rate grew to 20.0 percent this quarter, a rise of 3.6 percent from the Class A vacancy rate of 19.3 percent in the fourth quarter of 2010. The Class B vacancy rate increased to 20.1 percent in the first quarter of the year, an increase of 8.1 percent from the Class B vacancy rate of 19.3 percent at year-end 2010.
Class A rents in the White Plains CBD rose to $30.52 per square foot in the first quarter of 2011, an increase of 1.8 percent from Class A rents of $29.97 per square foot in the fourth quarter of 2010. Class B rents dropped to $22.03 per square foot this quarter, a decrease of 7.5 percent from Class B rents of $23.82 per square foot the previous quarter.
Office buildings along the I-287 West Corridor also posted rising vacancy rates in all property classes this quarter. The overall vacancy rate increased to 21.2 percent in the first quarter of 2011, a rise of 4.4 percent from the overall vacancy rate of 20.3 percent in the fourth quarter of 2010. The Class A vacancy rate grew to 24.0 percent this quarter, an increase of 4.8 percent from the Class A vacancy rate of 22.9 percent the previous quarter. The Class B vacancy rate in the I-287 West Corridor rose to 16.4 percent in the first quarter of the year, a boost of 4.5 percent from the Class B vacancy rate of 15.7 percent at year-end 2010.
Class A rents in the I-287 West submarket rose to $25.52 per square foot in the first quarter of 2011, an increase of 1.8 percent from Class A rents of $25.06 per square foot in the fourth quarter of 2010. Class B rents grew to $22.97 per square foot this quarter, a rise of 13.7 percent from Class B rates of $20.21 per square foot the previous quarter.
Jones Lang LaSalle is a leader in the New York tri-state commercial real estate market, with more than 1,700 of the most recognized industry experts offering brokerage, capital markets, facilities management, consulting, and project and development services. In 2010, the New York tri-state team completed approximately 17 million square feet in lease transactions, completed capital markets transactions valued at $861 million, managed projects valued at more than $5.8 billion, and oversaw a property and facilities management portfolio of 83.5 million square feet.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2010 global revenue of more than $2.9 billion, Jones Lang LaSalle serves clients in 60 countries from more than 1,000 locations worldwide, including 185 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $41 billion of assets under management. For further information, please visit our website, www.joneslanglasalle.com.
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