The worst appears to be over, but Westchester County's market for office space has a long way to go before it's back to being healthy.

Figures released by three commercial real estate brokerages in recent days show availability rates for the quarter ending Sept. 30 continuing to rise for the county overall, as more space has been added to the market than removed from it through new leases and subleases. As a result, average "asking" rents quoted by brokers continued to slide during the third quarter, to the mid- to upper-$20 range per square foot, the statistics showed.

Notwithstanding the numbers, brokers also said they saw the first signs of the office market bottoming out: Compared with a year ago, they say, rents aren't shrinking quite as fast. Space isn't returning to market as quickly. And lease deals are still being completed, albeit a smaller number than in better times.

"There are events that we think are coming together as a trend. We think it's going to be choppy. But I think if you can look at it from a mature person's perspective who has been around the block more than once, this is a good thing," Jim Fagan, senior managing director and branch manager for Cushman & Wakefield, which has offices in Stamford, CT, and Rye Brook, told Patch.

Especially for businesses that need office space, if they can afford to take advantage of the market, all four professionals agreed. They noted that landlords are more willing than in past years to offer concessions on tenant-improvement "work letter" allowances for renovations, and in some cases, even offer a few months' free rent.

Said Fagan: "They [tenant businesses] probably have 18 months before prices really start to rise, so they have time to shop for cheaper office space now — whether they choose to move, or to stay in their current offices."

"The good news for tenants is that even though they may have an existing lease, they can probably recast that lease to day and lower their rent today," he added.

By how much?

"It depends. I'd say I've seen anywhere from 8 to 20 percent [discounting on rents,]" said John Goodkind, managing principal with Newmark Knight Frank, which has offices in White Plains and Greenwich, CT. "Sometimes you get less aggressive on rent and do more concessions, or you could get a more aggressive rent and less in concessions. It's a tradeoff."

"Owners need the stability of leases with credit tenants, and tenants — the ones that have the need — can get a good deal in this market," Goodkind added.

The challenge for buildings owners, however, is that tenant businesses are likely now to need less space than a few years back. And as leases end from a few years back, when rents were higher because the market was closer to its peak, renewals are likely to occur at lower prices per square foot, said Carl Austin, president of Austin Corporate Properties, a commercial real estate brokerage in Rye Brook.

"Companies have become comfortable with fewer people, and even though they may still be in larger space with empty desks, the need to ramp up and hire is certainly not there yet. I think that's the challenge. Unless and until there are new hires, the need for space has really shrunk," Austin said. "The key is whether or not all the bankruptcies and all the sublet space has reached a bottom And I'm not sure we quite have."

Over the past two years, after accounting for landlord concessions, the value of lease transactions has diminished by 20 to 30 percent, said William V. Cuddy Jr., executive vice president with CB Richard Ellis.

"That is being reflected in the value diminution in the assets as well, in sales, the value of the real estate, though our asking rents in the last two years has only been reduced by 8 percent," Cuddy noted. That reflects the reluctance of landlords to lower rents except after exhausting other concessions such as more generous work letters.

CB Richard Ellis recorded 19.4 percent of Westchester's office space as available for lease or sublease during the third quarter. That compares with a 17.4 percent countywide availability rate compiled by Cushman & Wakefield, and a 23.9 percent rate by Newmark Knight Frank.

"The market is working its way through issues of supply and demand. From the supply side, owners are battening down the hatches and attending to their assets. And there's been some stress there, obviously. And then on the demand side, that has unfortunately been anemic," Cuddy said.

Those figures are about the highest seen in 15 years, according to brokers, and higher than a year ago during the third quarter of 2009, when Cushman & Wakefield recorded 17.2 percent from and Newmark Knight Frank, 22.8 percent; a figure from CB Richard Ellis was unavailable. Brokerage firms typically differ in their percentages because while they're studying the same county, they define geographic sub-markets differently, and differ on which buildings they study and when they count, or not count, properties within the market for available space.

The firms also offer varying figures for average "asking" rents widely quoted by brokers, which typically are higher than the "taking" rents agreed-upon by tenants and landlords. 

During the third quarter, according to CB Richard Ellis, office owners sought average asking rents for class A space of $26.40 psf — compared with the $26.62 psf by Newmark Knight Frank; Cushman & Wakefield didn't release a Q3 figure, but recorded $30.47 psf for Q2. A year ago, CBRE recorded average asking rents of $28.78 psf, and NKF $28.94 psf, both below C&W's asking rent, which actually inched up year-to-year from $30.44 in the second three months of 2009.

Brokers agree that one bright spot for Westchester has been downtown White Plains, which has outperformed the county market as a whole. During the third quarter, 16.4 percent (Cushman & Wakefield) to 18.2 percent (CB Richard Ellis) to 19.5 percent (Newmark Knight Frank) of downtown White Plains office space was available, compared with up to 28 percent a year ago.

Goodkind said White Plains has benefited from a spurt of leasing tied to the availability of below-market sublease space from IBM and subprime lender Argent Mortgage Company LLC, since acquired by Citigroup — while Austin noted tenants were drawn to White Plains' traditional selling points such as the county seat's proximity to mass transit and highways, and its mix of downtown shops and restaurants.

While Newmark Knight Frank cites $28.74 psf, and CB Richard Ellis, $29.74, Fagan of Cushman & Wakefield says the average now is closer to being above $30 psf: "If you want to do a deal sub-$30 [psf] in downtown White Plains, it's going to be hard. You may start in the high $20s [psf] but you're going to end up in the $30s."

Downtown White Plains' strength as a sub-market has come in part at the expense of the nearby suburban Westchester Avenue "Platinum Mile" from the White Plains/Harrison border, east to Rye Brook. Each brokerage defines the area differently, and some even divide it between its "White Plains" properties, where about 30 percent of the space is available for lease, and buildings further east, where rates are closer to 20 percent.

And unless the space is re-leased fast, Platinum Mile will get a lot emptier in 2012, when Starwood Hotels & Resorts Inc. bolts two White Plains buildings for a consolidated site in Stamford, Conn., taking with it 800 jobs in return for a $90 million package of economic incentives by Stamford and the state of Connecticut. Starwood now subleases 205,000 square feet at 1111 Westchester Ave., and another 118,700 square feet at 1133 Westchester Ave., the former IBM campus owned by Robert P. Weisz's RPW Group Inc. of Rye Brook.

While Connecticut prevailed over Westchester where Starwood is concerned, Cuddy said, Westchester has its advantages as well: "Westchester has a broad base of commercial and corporate activity. We've got a biotechnology sector, a financial sector, an IT sector, a consumer products sector. Some other markets are more myopic, and have suffered more. Our diversity in our corporate profile has been a benefit."

The trend away from Platinum Mile was reflected over the past year, as engineering firm Malcolm Pirnie Inc. moved into 87,308 square feet at Westchester One (44 South Broadway) from a Platinum Mile building, the 118,000-square-foot 104 Corporate Park Drive in Harrison (White Plains address). Owner Allan V. Rose's AVR Realty Company LLC of Yonkers has hired Austin's firm to seek out a user willing to buy or lease that entire building.

Also migrating to Westchester One recently was Reader's Digest, which moved into 142,754 square feet there from its longtime Chappaqua campus, bounded by the Saw Mill River Parkway and Route 117; and Avon Products, which settled into 21,670 square feet there.

While Harrison may have lost Malcolm Pirnie, it retained another large employer, Diversified Investment Advisors. But DIA — the US subsidiary of Dutch-owned AEGON NV — simply moved within the town/village, from about 80,000 square feet at 4 Manhattanville Road, within The Centre at Purchase, to Weisz's 440 Mamaroneck Ave., where it agreed to a 10-year lease for about 120,000 square feet.

Other leases of note in recent months:

• PepsiCo last month inked a new 38,792-square-foot lease at 3 Skyline Drive in Hawthorne, within the Mid-Westchester Executive Park of Mack-Cali Realty Corp.

• Software developer Allen Systems Group inked a 26,394-square-foot lease at RiverView at Purchase (287 Bowman Ave.). The company opted to move its Westchester office from 120 Old Post Road in Rye.

• Chubb Group of Insurance Cos. moved within White Plains, from 1311 Mamaroneck Ave. in White Plains, owned by real estate investor Caesar Figoni, into 16,000 square feet at 1133 Westchester Ave.

• Accounting firm O'Connor Davies Munns & Dobbins LLP expanded its space to 32,436 square feet within 500 Mamaroneck Ave. in Harrison, part of the Malkin Properties portfolio.

• Cavalry Investments LLC, also known as Calvary Portfolio Services, took 27,241 square feet at 500 Summit Lake Drive in Valhalla, owned by SL Green Realty Corp. and managed by its Reckson division.

• The nonprofit Cardinal McCloskey Services took 18,245 square feet at 115 Stevens Ave. in Valhalla, another SL Green-Reckson division building.

In addition, Westchester was able to retain several other sizeable employers that signed renewals of their expiring leases. In addition to the new Hawthorne lease, PepsiCo also renewed an existing lease for 75,000 square feet, keeping it the anchor tenant at 100 Summit Lake Drive in Valhalla, also owned by SL Green's Reckson division. Pearson Education kept its 43,997 square feet at Malkin Properties' 10 Bank Street in downtown White Plains, while European railroad ticket agent Rail Europe Inc. renewed its lease for 31,107 square feet at Westchester One; and HRH Construction renewed for 18,500 square feet at Mack-Cali's 11 Martine Ave.

"We saw some pent up demand, and tenants that have leases expiring are looking to perhaps grow. Now's a good opportunity to do that with the market soft," Goodkind said.

Another bright spot for Westchester, Austin said, is the sub-market of office buildings along Route 172 in Mount Kisco. The corridor's rents "have stayed reasonably firm, in the mid- to high-$20s [psf]," Austin said, since tenant businesses, typically small to mid-size, have stayed put rather than move out, keeping the supply of space steady if tight.

Countywide, he said, signs suggest an office market that has nowhere to go but up.

"I think it's fair to say the wave of large blocks of space coming back on the market seems to have subsided. The next year to 18 months will really reinforce that we're at the bottom, or that we have an extended period of time that we're still going to stay at the bottom. But I think a lot of the hemorrhaging, happily, is behind us," Austin said.