Jones Lang LaSalle Reports Signs of Improvement for Fairfield County, Westchester County Office Markets at Year-end 2011

Fairfield County sees overall vacancy rates fall, overall average asking rental rates increase in past year; Westchester County posts small rise in rents despite boost in vacancy rates

STAMFORD, CT – January 31, 2012 – (RealEstateRama) — Jones Lang LaSalle reported that Fairfield County has seen steady improvement during the past year, posting falling vacancy rates and rising average asking rental rates in all property classes at year-end 2011. Westchester County presented more of a mixed picture, recording a small increase in rents despite an increase in vacancy rates in all property classes in the final quarter of the year.

Fairfield County

“The Fairfield County labor market is adding jobs, but the pace of growth is less than sufficient to propel a significant rebound in the local economy,” said Robert Ageloff, international director and head of Jones Lang LaSalle’s Stamford office. “Office-using sectors appear to be on a stronger recovery track despite a delay in recovery. The financial services industry, which typically drives office market demand, added more than 300 jobs in Fairfield County during the fourth quarter of 2011, after months of lackluster hiring. Employment in the sector increased a total of 3.5 percent during 2011. Although the office market recovery will lag this momentum in office-using employment, fundamentals were relatively stable though year-end.”

Fairfield County’s office market has seen significant improvement in vacancy rates during the past year. The county’s overall vacancy rate fell to 22.1 percent in the fourth quarter of 2011, dropping 2.6 percent from the overall vacancy rate of 22.7 percent in fourth quarter of 2010. The Class A vacancy rate slipped to 21.5 percent this quarter, decreasing 2.7 percent from the Class A vacancy rate of 22.1 percent one year earlier. Fairfield County’s Class B vacancy rate dropped to 24.0 percent in the final quarter of 2011, falling 4 percent from the Class B vacancy rate of 25.0 percent at year-end 2010.

Average asking rental rates throughout Fairfield County posted slight gains in the past 12 months. Class A rents in Fairfield County rose to $35.82 per square foot in the fourth quarter of 2011, an increase of less than 1 percent from Class A rents of $35.78 per square foot in the fourth quarter of 2010. The county’s Class B rates grew to $22.72 per square foot this quarter, a boost of 3.9 percent from Class B rates of $21.86 per square foot one year earlier.

Leasing activity in Fairfield County accelerated through year-end 2011, driving year-to-date net absorption to 378,748 square feet. While leasing activity was nearly 40.0 percent lower than in 2010, totaling 2.5 million square feet for the year, there were fewer tenants vacating space. Many tenants with lease expirations during 2011 chose to execute renewals rather than relocate.

The Stamford CBD/Railroad submarket saw vacancy rates increase in all property classes during the past year. The overall vacancy rate increased to 24.1 percent in the fourth quarter of 2011, a boost of 6.2 percent from the overall vacancy rate of 22.7 percent in the fourth quarter of 2010. The submarket’s Class A vacancy rate rose to 24.6 percent this quarter, an increase of 6.5 percent from the Class A vacancy rate of 23.1 percent one year earlier. The Class B vacancy rate grew to 14.9 percent in the final quarter of the year, rising 8.8 percent from the Class B vacancy rate of 13.7 percent at year-end 2010.

The submarket’s Class A office product continued to show some strength in the past 12 months. Class A rents in the Stamford CBD/Railroad area rose to $43.80 per square foot in the fourth quarter of 2011, increasing 1.6 percent from Class A rates of $43.11 per square foot in the fourth quarter of 2010. Class B rents decreased to $26.82 per square foot this quarter, dropping 2.3 percent from Class B rates of $27.44 per square foot one year earlier.

Although the Greenwich CBD/Railroad submarket posted rising vacancy rates for Class A office buildings during the past year, the increase was more than offset by a large drop in vacancy rates for Class B space. The overall vacancy rate dropped to 19.3 percent in the fourth quarter of 2011, a decrease of 2.5 percent from the overall vacancy rate of 19.8 percent in the fourth quarter of 2010. The Class A vacancy rate rose to 22.5 percent this quarter, increasing 9.2 percent from the Class A vacancy rate of 20.6 percent one year earlier. The submarket’s Class B vacancy rate fell to 9.7 percent in the final quarter of the year, a plunge of 44.9 percent from the Class B vacancy rate of 17.6 percent at year-end 2010.
The surge of activity throughout the year within the submarket’s Class B market fueled a boost in average asking rental rates for the product type. Class A rents dropped to $87.86 per square foot in the fourth quarter of 2011, falling 4.1 percent from Class A rates of $91.65 per square foot in the fourth quarter of 2011. The area’s Class B rates rose to $68.08 per square foot this quarter, climbing 9.5 percent from Class B rents of $62.18 per square foot one year earlier.

Westchester County

“Although overall labor market fundamentals in Westchester County are gaining strength, there has been a slowdown in office-using sectors,” said Ageloff. “During 2011, the year-over-year employment growth rate for office-using sectors slowed to 1.7 percent compared with 2.4 percent growth during 2010. Office-using sectors added slightly more than 400 jobs to payrolls during the fourth quarter of 2011, on par with the third quarter. The slower growth in office-using sectors is resulting in fewer tenant requirements in the market.”
During the past year, Westchester County posted minimal increases in vacancy rates in all property

types. The overall vacancy rate rose to 19.6 percent in the fourth quarter of 2011, increasing 3.2 percent from the overall vacancy rate of 19.0 percent in the fourth quarter of 2010. The county’s Class A vacancy rate increased to 21.6 percent this quarter, rising 3.3 percent from the Class A vacancy rate of 20.9 percent one year earlier. The Class B vacancy rate rose to 14.4 percent in the final quarter of the year, increasing 2.9 percent from the Class B rate of 14.0 percent at year-end 2010.

Despite rising vacancy rates during the past year, Westchester County’s Class A office buildings recorded a small increase in average asking rental rates. Class A rents rose to $27.30 per square foot in the fourth quarter of 2011, increasing 1 percent from Class A rates of $27.04 per square foot in the fourth quarter of 2010. Class B rents decreased slightly to $22.18 per square foot this quarter, falling less than 1 percent from Class B rents of $22.23 per square foot one year earlier.

A resurgence in leasing activity in Westchester County during 2011 was not enough to offset several large blocks of space coming on the market, including sublease space from Starwood Hotels and Resorts as the firm completes a relocation to Stamford from White Plains, N.Y. The majority of leasing activity was in the form of renewals and extensions, which also meant that much of the space never even hit the market. Net absorption for the year totaled negative 177,755 square feet, but marked an improvement compared with nearly 500,000 square feet of negative net absorption in 2010.

Similar to the overall market, the White Plains CBD recorded small increases to vacancy rates in all property classes during the past year. The overall vacancy rate rose to 19.5 percent in the fourth quarter of 2011, increasing 1.6 percent from the overall vacancy rate of 19.2 percent in the fourth quarter of 2010. The CBD’s Class A vacancy rate increased to 19.4 percent this quarter, rising less than 1 percent from the Class A vacancy rate of 19.3 percent one year earlier. The Class B vacancy rate grew to 19.9 percent in the final quarter of 2011, increasing 7.0 percent from the Class B vacancy rate of 18.6 percent at year-end 2010.

While Class A office buildings throughout the White Plains CBD saw gains in average asking rental rates, the submarket’s Class B product posted a significant decrease in rents. Class A rents rose to $30.96 per square foot in the fourth quarter of 2011, an increase of 3.3 percent from Class A rents of $29.97 per square foot in the fourth quarter of 2010. Class B rents fell to $21.40 per square foot this quarter, a drop of 10.2 percent from Class B rents of $23.82 per square foot one year earlier.

Office buildings along the I-287 West Corridor also posted an increase in vacancy rates for all property types in the past 12 months. The overall vacancy rate grew to 21.0 percent in the fourth quarter of 2011, rising 3.4 percent from the overall vacancy rate of 20.3 percent in the fourth quarter of 2010. The Class A vacancy rate increased to 23.4 percent this quarter, expanding 2.2 percent from the Class A vacancy rate of 22.9 percent one year earlier. The Class B vacancy rate in the I-287 West Corridor rose to 16.7 percent in the final quarter of 2011, a boost of 6.4 percent from the Class B vacancy rate of 15.7 percent at year-end 2010.

The I-287 West Corridor was one of the few submarkets in Westchester County to record an increase

in average asking rental rates in all property classes during the past year. Class A rents grew to $25.30 per square foot in the fourth quarter of 2011, an increase of 1 percent from Class A rents of $25.06 per square foot in the fourth quarter of 2010. Class B rents rose to $20.74 per square foot this quarter, expanding 2.6 percent from Class B rates of $20.21 one year earlier.

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 70 countries from more than 1,000 locations worldwide, including 200 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 $47.9 billion of assets under management. For further information, please visit our website, www.joneslanglasalle.com

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