Stamford Advocate
Economy takes toll on county's commercial real estate
The commercial real estate market in Fairfield County continues to drift in the doldrums as many companies remain wary about hiring more staff and financial services firms, the bedrock of the area economy, grapple with the uncertain investment market.
Fairfield County's overall leasing activity for the first half of 2012 totaled 857,069 square feet, a 23.9 percent decrease from the 1.13 million square feet leased in the first half of 2011, according to the Stamford office of commercial real estate brokerage firm Cushman & Wakefield.
The 2012 year-to-date leasing activity represents the second-slowest half-year period in the last 10 years, well below the 1.4-million-square-foot average for mid-year periods over the last decade, said Jim Fagan, senior managing director of the Stamford office.
Class-A leasing activity for the second quarter was 390,165 square feet, an increase from the 250,734 recorded last quarter, but a 41.2 percent decrease from 2Q-11's leasing activity.
"In theory, quite a few 10-year transactions that were signed in 2003 should have been up for renewal this year," Fagan said. "With the difficult economy over the last few years, however, a number of early renewals and blend-and-extend transactions have taken some of the vitality out of leasing activity this year."
Landlords are offering inducements to retain and attract credit-worthy tenants, said John Hannigan, principal in Stamford-based Choyce Peterson, a firm that represents companies in their search for rental space and interaction with landlords.
"The good news is many landlords are ready to reach for a deal," he said. "Executives and business owners are cautiously optimistic, but they're carefully thinking through their space needs. I don't see any dramatic changes over the next six months."
At 20.9 percent, the Fairfield County Class-A vacancy rate is consistent with both the first quarter (21 percent) and second quarter of 2011 (21.1 percent).
A significant portion of this vacancy is tied up in a few large buildings, whose owners want to land primarily large users, Fagan said.
"As an example, 695 E. Main St., accounts for almost 9.7 percent of the Stamford CBD's Class-A vacancy," he said.
Although the Class-A overall vacancy rate in the Stamford central business district market decreased slightly from last quarter, it had the largest year-over-year increase, rising 3.2 percentage points from 2Q-11 to 26.2 percent. Large blocks of sublease space were added to the market in the second half of 2011 -- UBS's 110,346 square feet at 400 Atlantic St., and 45,000 square feet at 201 Tresser Boulevard, and Legg Mason's 53,028-square-foot sublease at 100 Stamford Place.
The Stamford non-CBD submarket had the largest year-over-year decrease in Class-A vacancy, going from 29.6 percent in 2Q-11 to 26.6 percent, largely due to the NBC Sports' 100,000-square-foot lease at 1 Blachley Road in 2011.
The Greenwich Class-A vacancy rate increased by 1.8 percentage points from last quarter's 19.6 percent. There was a total of 46,190 square feet of direct space added to the Greenwich submarket this quarter. Asking rent in Greenwich grew from $55.78 per square feet in 2Q-11 to $68.66.
The Fairfield County Class-A direct average asking rental rates grew from $35.64 at 2Q-11 to $38.77.
There were four only new leases signed this quarter above 20,000 square feet -- Freepoint Commodities' 59,000-square-foot lease at 58 Commerce Road in Stamford; Millward Brown's 50,778-square-foot lease at 401 Merritt 7 in Norwalk; GE Capital Real Estate's 49,500-square-foot expansion at 901 Main Ave., in Norwalk; and Tronox Ltd.'s 27,145-square-foot lease at 263 Tresser Boulevard in Stamford.
There was a significant amount of renewal activity this quarter in the Fairfield County market, "a true indication of a down market," according to Fagan.
"When you move, it costs money. When you're in a space for 10 years, chances are it needs a facelift," he said, but it's a company's least expensive option.
Renewals included GE Capital's 66,124-square-foot renewal at 83 Wooster Heights Road in Danbury; Bridgewater Associates' 32,072-square-foot renewal at 355 Riverside Avenue in Westport; Verition Fund Management's 26,642-square-foot renewal at 1 American Lane in Greenwich; and RSM McGladry's 25,620-square-foot renewal at 850 Canal St. in Stamford.
"Companies that have a confident, long-term view of their businesses growth potential are taking advantage of market conditions to secure better economic packages in exchange for longer lease commitments," Fagan said.
Employment increased by 1,000 jobs between March and May, but is still more than 20,000 jobs or 5 percent below the pre-recession peak, according to Cushman & Wakefield.
Businesses are uncertain about the national political environment and global financial conditions and holding back hiring, resulting in a rising vacancy rate, Fagan said.
Robert Ageloff, international director and head of Jones Lang LaSalle's Stamford office, echoed Fagan's comments.
"With the backdrop of a national economy that continues to fall into a pattern of one step forward, two steps back, and even more volatility in the financial markets and neighboring Manhattan, Fairfield County lacks traction for economic growth," he said. "The local economy continues to struggle, but the lack of positive response to the intermittent surges in recovery mean that there has not been any buildup in expectations for a strong rebound."
There were three significant transactions (20,000 square feet and above) last quarter, including 6 Armstrong Road in Shelton, sold by Fusco Management Co. for $8.2 million to Marcus Partners; 75 Holly Hill Lane in Greenwich, sold by Core Plus Properties for $19.3 million to ClearRock Properties; and the acquisition of 100 W. Putnam Ave., in Greenwich by Torchlight Investors through an agreement with building lenders.
Choyce Peterson, Inc.
Choyce Peterson, Inc.
Choyce Peterson, Inc.
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