The Westchester County office market has been up and down through the first three quarters of the year. The biggest piece of news in the very quiet first quarter was the announcement of PepsiCo’s return of the entire 540,000-square-foot One Pepsi Way in Somers to the market when its lease expires in early 2016. This news propelled the market to a net absorption of negative 710,000 square feet for the quarter. Renewals rather than new leases drove the activity.
Much better general velocity in the second quarter led to a healthy 1.2 million square feet of leasing activity for the first half of the year, including positive net absorption of 83,000 square feet. Once again, PepsiCo made the big news. It leased two entire buildings totaling 361,181 square feet at 1111/1129 Westchester Ave. There were a higher number of leases, more new leases and the important 10,000-to 25,000-square-foot transactions jumped 35 percent in Q2 vs. Q1.
The third quarter did not offer any significant changes in the market, but the blockbuster PepsiCo deal in White Plains helped the year-to-date figures for 2015 exceed leasing for the entire prior year. New deals in Q3 increased by 26 percent but the total square footage was smaller than last year. Renewals increased by 31 percent over Q2, staying on par with 2014 numbers. Leases of under 5,000 square feet were not dominating the market in terms of the number of transactions, as they have for many years.
A pretty good year
Overall, it has been a pretty good year. The average size of leases is up about 50 percent from 2015, to about 9,000 square feet. A good number of companies of all sizes are growing and extending their leases, which is a welcome and positive trend.
The big issues seem to be flat leasing activity in the White Plains Central Business District and the dearth of mid- to large-sized blocks of space along the 287 corridor, which can hinder new tenants from finding enough alternatives in their desired locations in the county. Statistically the northern submarket looks pretty dismal and its numbers continue to impact negatively on the market as a whole.
There is already 2 million square feet of leasing for the year, against about 1.5 million square feet in 2014. The PepsiCo transaction in White Plains helped to move the needle, but so did many expansion/renewal leases in sizes in excess of 10,000 square feet in almost all submarkets.
“Without a lot of big deals, we will exceed a healthy 2 million square feet of leasing activity,” said Karolina Pardo-Alexandre, research manager for Newmark Grubb Knight Frank. “The average deal size increased by 39 percent over last year and companies of all sizes expanded and extended their lease commitments. All in all, it speaks to a healthier market going forward.”