Fairfield County available office space tightens
Commercial real estate firms report Fairfield County's available office space appears to be filling up
Published 8:06 pm, Wednesday, April 23, 2014
Much of Fairfield County's economic strength is reflected by the occupancy levels of those big glass-and-steel office buildings that populate the region's four corners, and based on the first-quarter reports from commercial real estate firms, the climate might be improving.
Southwestern Connecticut's office market showed signs of real improvement in the first quarter, according to RHYS Commercial, a Stamford-based commercial real estate brokerage firm.
About 11.35 million square feet of office space was available at the end of the quarter -- a 2.3 percent decrease from the previous quarter and 4 percent less than at the end of the first quarter of 2013, RHYS said it in its first-quarter State of the Market report.
Available Class A office space fell to its lowest level in the last two years, dropping 3.8 percent in the quarter to 6.74 million square feet, while Class B office space availability levels fell to 4.61 million square feet, slightly lower than the fourth-quarter of 2013 and 2.4 percent lower than the same period last year, RHYS reported.
Real Estate Listings
Available space is different from vacant space because it is no longer on the market after a company agrees to lease a property, according to Eric Griffin, RHYS director of research, who said it could take upwards of six months for a company to move into a space.
"Availability pertains to properties available for lease. Vacant properties are not necessarily available," he said.
The southern submarket (Stamford and Greenwich), which accounts for nearly half of available space within the entire market, saw the availability rate decrease of 5.4 percent, comparing the first quarter with the fourth quarter of 2013 and 5.5 percent, comparing the first quarter with the first quarter of 2013.
The Class A and Class B availability rate in Stamford was 24.5 percent at the end of the first quarter according to Eric Griffin, director of research at RHYS, 21.5 percent in Greenwich, 15.8 percent in Bridgeport and 21.5 percent in Danbury.
The central submarket (Darien, New Canaan, Norwalk, Westport and Wilton), which makes up 26.9 percent of Fairfield County's available space, saw its available space rise 1.2 percent since the last quarter and 2.4 percent since the same quarter a year ago.
Available space within the eastern submarket (Bridgeport, Fairfield, Shelton, Stratford and Trumbull), which holds 13.9 percent of the total available market space, saw the strongest year-over-year improvement, according to RHYS, with 8.8 percent less space available than a year ago.
The northern submarket (Bethel, Brookfield, Danbury, Newtown and Ridgefield) had 1.7 percent more space available than at the end of the previous quarter but remained 5.4 percent lower than at the end of the last year's first quarter.
Griffin predicted a continued improvement in the occupancy of office buildings as the economy improves.
"It's just a matter of time. They economy is improving and rents have stayed relatively low enough that companies can expand or move into new space entirely," he said.
The trend of office rental rates declining from south to north and east continued in the first quarter.
Across the submarkets, the highest rate was in the southern submarket, at $43.92 per square foot, according to RHYS, while the northern submarket recorded an average rate of $24.27 per square foot, and the central submarket finished the quarter with an average rate of $30.44 per square foot.
The lowest average rental rate was recorded in the eastern submarket, at $21.68 per square foot.
Average rents decline
The average rental rate for all Class A and B office space across Fairfield County finished the first quarter at $34.21 per square foot, 0.5 percent lower than the previous quarter's average but 2.6 percent higher than the average rate recorded a year ago.
The average rate for direct space ended the most recent quarter at $34.15 per square foot, while the average rate for sublet space was slightly higher than direct space for the second consecutive quarter, coming in at $35.27 per square foot, according to RHYS.
A first-quarter report from the Stamford office of Colliers International focusing on Stamford's central business district nearly mirrored the RHYS commentary.
Colliers reported an overall availability rate of 22.6 percent 31 Class A buildings in the city's CBD, totaling 8.25 million square feet.
The availability totals 1.9 million square feet, down 1.7 percent from the last quarter and down 2.5 percent from the first quarter of 2013, according to Collier's, attributing the drop in availability in the first quarter to Deloitte's lease of 117,700 square feet of the Clock Tower at 695 E. Main St., Charter Communications' addition of 36,782 square feet of subleased space at 400 Atlantic St., Tokio Millennium RE's relocation of 11,500 square feet to 1 Landmark Square and American Express Travel Related Services moving to 10,842 square feet at 100 First Stamford Place.
"You're seeing expansion. Starwood Hotels is expanding into additional space at 333 Ludlow (in Stamford)," said Jeff Williams, executive managing director at Colliers. "The last time leasing was this strong was in the third quarter 2012."
The largest blocks of available space in the CBD Class A market are the remaining 452,065 square feet at Building and Land Technology's building at 695 E. Main St., and 93,983 square feet at the Landis Group's building at 400 Atlantic St., according to Collier's.
"The vacancy rate is reflective of a few buildings with large blocks of space available. It's a couple points in the rate," Williams said, adding office buildings in the Stamford CBD benefit from proximity to the city's transportation center, but owners of Class A office buildings farther from the train station now offer shuttle services. "Landlords are listening to tenants, and they are responding."
Eight large transactions took place during the first across Fairfield County, totaling 392,817 square feet, including the Charter Communications and Deloitte deals in Stamford, according to RHYS.
At 3001 Summer St. in Stamford, Pitney Bowes leased 74,192 square feet across the entire sixth and part of the seventh floor, while Genworth signed a renewal to fully relocate within the building onto the 44,597 square foot fourth floor.
Hitachi Credit Union signed a renewal for its 33,990 square feet of space on the fourth floor of 800 Connecticut Ave., in Norwalk. In Wilton, Sirius Decision, renewed its 17,744-square-foot space on the second floor of 187 Danbury Road and expanded into an additional 5,855 square feet on the same floor.
JP Morgan Chase signed a renewal for its 20,899 square foot office on the seventh floor of 2 Corporate Drive in Shelton, while in Trumbull, Gartner expanded into an additional 20,000 square feet of space on the first floor of 35 Nutmeg Drive.
The impressive jump in occupied space in the eastern submarket can be mostly credited to the arrival of one operation, according to Jon Angel, president of Angel Commercial in Fairfield.
Save the Children recently announced its move from Westport to a 58,000-square-foot space at 501 Kings Highway in Fairfield.
"The building went to 100 percent leased. It impacts the vacancy percentage for the entire area," he said. "There's not a lot of new construction in the area, and (office) buildings are smaller. They don't lend themselves to having national tenants. Bridgeport isn't sitting with a whole lot of blocks of large space."
lead the charge
Expansion into vacant office space in the eastern part of the county "is spotty at best," according to Angel, but some smaller office operators are seeing better times ahead and adding space.
That seems to be the case in the Danbury area as smaller office users like insurance and accounting firms are showing their confidence in the economy by buying office space.
"It's smaller stuff. Businesses are starting to expand," said Jeff Ryer, principal of Ryer Associates.
About a half-dozen multitenant office complexes in the Danbury area have been purchased in the last few years and have been turned around by their new owners, offering attractive space to potential tenants, he said, citing the Lee Farm, 100 Mill Plain Road, Mountain View and Matrix complexes as examples.
"They're leasing up," Ryer said, adding the sprawling 1.3-million-square-foot Matrix complex, the former Union Carbide headquarters, is an attractive option because of its amenities. "Because of its size, it's a tough place to fill, but they have a great tenant package."