Stamford aims to rebound from major office vacancies
STAMFORD — A visitor’s view from the sixth floor of 200 Elm St. extends more than the length of a football field — without even gazing through a window.
Only a few partitions and steel support beams now stand in that expanse in the BLT Financial Centre, which includes 200 Elm St. and the adjoining clock tower building at 695 East Main St. But hundreds of players will walk the same area within the next year. Henkel Consumer Goods signed earlier this year a lease for 135,000 square feet on the entire sixth floor and most of the fifth level of the Elm Street building, one of the cornerstone properties of downtown Stamford.
Large and longstanding vacancies have dominated the landscape at the BLT Financial Centre and many other parts of the city in recent years, as the office sector has reconfigured itself in response to the last recession and a fast-changing workplace culture.
Neither the BLT landmark nor Stamford’s overall office sector are operating near capacity, but the arrival of the likes of Henkel has spurred hopes among realtors, property owners and others in the city’s business community that Stamford’s economic growth will soon rouse the market from its recent torpor.
“The Stamford market didn’t have a lot of velocity for the last couple of years,” Building and Land Technology Executive Vice President Leslie Whatley said in an interview last week. “It’s an encouraging sign for the city of Stamford, as well as for the building, that we’ve had such activity and that we’ve got two strong tenants so far.”
Rocked by recession
Stamford enjoyed robust activity in its office market during much of the decade before the last recession. The expansion of financial-services powerhouses like UBS fueled the growth.
“That is when you saw the vacancy rates go from the 20s into the single digits,” said Jack Condlin, president and CEO of the Stamford Chamber of Commerce. “It was a great shot in the arm. You started to see more hedge funds and more financial sector businesses move into Stamford.”
The onset of the Great Recession in 2008 and its protracted fallout roiled the city’s real estate market. As many companies cut their workforces or relocated their local contingents, office availability surged. The Fairfield County vacancy rate rose from about 15 percent in the third quarter of 2007 to more than 20 percent by the third quarter of 2009, according to data from the Manhattan-based commercial real estate firm Newmark Grubb Knight Frank.
With a total inventory of some 16.3 million square feet of office space, Stamford recorded a 23 percent vacancy rate in the third quarter of 2016. Fairfield County posted a 22 percent vacancy rate in the past quarter.
Shifting corporate strategies
During the past year, a now-embattled UBS has moved employees out of its longtime downtown hub at 677 Washington Blvd. The 720,000-square-foot complex houses one of the world’s largest trading floors, which covers about 100,000 square feet.
Approximately 900 UBS employees now work across the street at 600 Washington Blvd., the Americas headquarters of Royal Bank of Scotland, according to a count given earlier this year by UBS. A series of layoffs that has reduced RBS’ Stamford contingent by about 500 people in the past two years created much of the space that UBS has taken.
UBS did not respond to a message seeking comment on its Stamford operations.
The BLT Financial Centre languished for several years after the 2010 departure of reinsurance giant Gen Re, which moved to a Long Ridge Road campus. BLT acquired the property in 2012, when it was entirely vacant. It then embarked on a top-to-bottom renovation of the nearly 590,000-square-foot complex.
In November 2014, professional-services firm Deloitte moved into approximately 120,000 square feet at 695 East Main St. Deloitte is the sole current tenant at the Financial Centre. Henkel is scheduled to arrive next summer. Audit, tax and consulting firm RSM, which recently signed a lease for about 28,000 square feet at 200 Elm St., is also scheduled to move in during the same period.
Overall leasing numbers, including vacancy rates, change significantly when deals close on voluminous properties such as the BLT Financial Centre and 677 Washington Blvd. But those blockbuster transactions represent only a small minority of activity. Leases for space covering less than 5,000 square feet accounted for about two-thirds of the deals signed in the past quarter, according to Newmark Grubb Knight Frank.
Among the recent arrivals leasing smaller spaces, the Piscataway, N.J.-headquartered cybersecurity firm BlackStratus opened in April about 7,000 square feet of offices at the recently renovated 9 West Broad St. building to house a security operations center and a sales team to support a new product. The building’s amenities and proximity to restaurants, stores, Mill River Park and the downtown Metro-North train station appealed to BlackStratus executives.
“The building had all the facilities we were looking for, including a cafeteria, a workout facility and parking that is plentiful,” said BlackStratus CEO Dale Cline. “Very few people have siloed activities. You have life and work issues that intertwine. In this location, it is very convenient.”
Many of Stamford’s office properties were built in the 1970s and 1980s. Today, corporations increasingly favor open layouts that aim to foster collaboration through shared working spaces and other gathering areas. Telecommuting has also contributed to the shrinking of many office footprints.
“Where one person once sat in 150 square feet of space, now two people are sitting in that same space,” said Christian Bangert, executive vice president and principal at Rhys, a Stamford-based commercial real estate firm. “It saves money. You’re leasing potentially less office space and being more efficient in what you’re spending and putting more tenants in that space.”
The renovation of the BLT Financial Centre, which was built in 1984, responds to companies’ evolving needs, BLT officials said. A theater-style conference center, a dining hall that can be turned into a meeting room, a sprawling courtyard and an expansive foyer comprise some of the property’s main communal areas.
“We want to make it a place where they not only want to come every day, but where they can also host events,” Whatley said.
A number of Realtors said that they are cautiously optimistic about the local office market’s prospects for 2017.
“I don’t pretend that the market is robust, but I like where we’re going,” said Rhys Founder and CEO Cory Gubner. “When the supply decreases and demand increases, that’s when the pendulum starts to swing toward the landlords’ favor. But the landlord with a 75 percent occupancy rate is going to act differently than the landlord of a building that’s at 10 percent occupancy.”
Stamford remains a dominant regional force. The city has accounted this year, through the third quarter, for about 40 percent of the 2.3 million square feet of gross leasing activity in Fairfield County, according to Newmark Grubb Knight Frank.
“Although this is a reduced share of leasing activity in comparison to the past two years, Stamford remains one of the county’s most active markets,” said NGKF research manager Karolina Pardo-Alexandre.
Recent job indicators point to signs of growth — although likely on a modest scale — for the office market in the coming months. Stamford’s unemployment rate last month totaled 3.1 percent, compared with a state average of 4.7 percent. The city’s economy has added about 1,600 positions since January.
“The digital revolution is migrating out to Fairfield County, but it is not yet absorbing huge amounts of space,” said Joe McGee, vice president of public policy for The Business Council of Fairfield County. “We’re in that kind of weird space, where we’re seeing a lot of economic activity for smaller and innovative digital companies, but they’re still in early stages of development.”
The city’s and state’s heavily used mass transit systems, meanwhile, present both obstacles and opportunities to the office leasing market. BLT markets surrounding infrastructure as an advantage for tenants of the Financial Centre. The property overlooks I-95 and stands within a 15-minute walk of the downtown Metro-North station.
“Transit-oriented development is a big trend right now, and we’re 45 minutes away from the city (New York),” Whatley said. “Stamford has a bright future because of its proximity to New York City.”
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