Fairfield County’s office leasing demand continued to trend upward in 2018 with overall leasing activity outpacing 2017’s annual demand. In Westchester County, overall leasing activity began to taper off in 2018. In both Westchester and Fairfield counties, overall vacancy increased and asking rents fell slightly in 2018.
In Fairfield County, office space demand continued to grow in 2018 with overall leasing activity outpacing 2017’s annual demand. Stamford had nearly one of every three new lease transactions in Fairfield County last year, which accounted for slightly over half of Fairfield’s overall leasing volume at 50.4%. Tenants, however, continued to economize on space with the average transaction size falling approximately 17.1% below the five-year historical average of 10,218 square feet (sf) to 8,475 sf.
Vacancy in Fairfield County increased 220 basis points (bps) in 2018 to 25.3%. Stamford registered the sharpest year-over-year increase in vacancy—460 bps to 31.8%, mainly attributed to GE Energy making its entire building available at 800 Long Ridge Road. Conversely, Greenwich recorded a noteworthy 250 bps year-over-year drop in its overall vacancy rate to 16.5%.
Overall asking rents in Fairfield County declined by $0.53 per square foot (psf) to $32.47 in 2018, but Stamford’s ticked upward in 2018 by $1.42 psf to $37.21.
Overall leasing activity in Westchester County began to taper last year, down 27.7% from 2017. The East I-287 submarket recorded more than one-third of the total leasing volume in 2018, followed by the White Plains CBD submarket accounting for approximately 25.0% of county-wide demand. The tenants in this market are also continuing to densify as the average transaction size continued to shrink in 2018, down 27.4% from the five-year historical average of 8,188 sf.
Similar to Fairfield County, overall vacancy in Westchester increased 100 bps from the start of 2018 to 26.5%, but the White Plains CBD submarket registered a 70-bp drop in overall vacancy to 17.3% since the first quarter.
Asking rents in Westchester dropped $1.47 psf in 2018, ending the year at $27.59. The White Plains CBD submarket held a $5.79-psf premium over the rest of the market, with an average asking rent of $33.26 psf.
For both Fairfield and Westchester counties, we will continue to see tenants densify in 2019. Demand is expected to increase, although future tenants may be prompted to lease less space due to a higher price point in some of the more urban office markets. Due to this, we can expect leasing activity to begin to slow this year with a slight increase in supply. Submarkets that have access to efficient public transportation networks and building amenities will continue to drive growth in the future.