New Haven Register (New Haven, CT)
POST-PANDEMIC OFFICE MARKET HOLDS UP
By now it’s long past clear that the COVID-19 pandemic has permanently altered how white-collar professionals work, but what that means for the office market is still unfolding.
The popularity of hybrid workplaces — an important role for in-person collaboration — is reflected in the steady performance in recent months of southwestern Connecticut’s office-leasing market. While companies’ demand for office space is not explosive, Fairfield County is still churning out significant deals.
One difference: Tenants are more discerning than ever, according to a new report from commercial real estate brokerage JLL.
“The demand is really for the higher quality assets, and there’s less demand for the second-tier ones,” Betsy Buckley, a Stamfordbased senior vice president with JLL, said in an interview. “If you want to get your employees back, your office space has to be unbelievable. If you’re trying to attract tenants from New York City, you need to have the equivalent of a New York City building.”
For the first quarter, Fairfield County recorded about 750,000 square feet of leasing deals, compared with about 514,000 square feet in the fourth quarter of 2021, according to JLL.
The increase was driven by the
first quarter’s largest transaction, which did not fill vacant office space.
Shipping-and-mailing firm Pitney Bowes’ did a sale-leaseback of its operations center at 27 Waterview Drive in Shelton. The company sold the approximately 310,000square-foot property for about $50 million. But it is staying there by leasing 100 percent of the site, with about 630 employees based there.
“In 2021, we determined conditions were favorable for a saleleaseback of our Shelton property and we went to market negotiating
with several potential buyers,” Pitney Bowes, which is headquartered in Stamford, said in a written statement. “BDP Holdings from New Jersey was the successful bidder, and we are excited to have them as our landlord for our longterm lease.”
Boosted by the ongoing presence of large companies such as Pitney Bowes, Fairfield County’s officeavailability rate has not fluctuated dramatically during the pandemic. In the first quarter, the county’s total vacancy rate ran at 23.7 percent, compared with 24.2 percent in the fourth quarter of 2021 and 25.6 percent in the first quarter of 2021.
Among submarkets in southwestern Connecticut, the vacancy rate ran the lowest in the Greenwich central business district, at 6.1 percent. Leading the deals in the Greenwich CBD, Silver Point Capital signed a 32,000-square-foot renewal and expansion at 2 Greenwich Plaza. In another sign of downtown Greenwich’s strength, alternative-investment firm Apollo Global Management announced last month that it would buy the office complex at 100 W. Putnam Ave., for more than $200 million. Last year, Apollo leased about 43,000 square feet at 100 W. Putnam.
Central Fairfield County, which includes the Darien-Norwalk-Westport corridor, and Stamford, recorded the county’s highest vacancy rates – respectively, running at 31.1 percent and 29.7 percent. The high vacancy rate in Stamford has persisted since the 2008 financial crisis and belies the arrival in recent years of many companies to the city.
Among the Stamford newcomers are tobacco giant Philip Morris International, the cryp to currency and-block chain-focused conglomerate Digital Currency Group, real estate-focused financial-technology firm Tomo Networks and manufacturer and technology-services provider ITT.
In another sign of confidence in the Stamford office market, the office building at 400 Atlantic St., the former headquarters of Spectrum-branded services provider Charter Communications, was sold earlier this month for $72 million. George Comfort & Sons and AVG Partners, the apparent buyers of the property, also own the neighboring office complex at 677 Washington Blvd., where PMI plans to open its new headquarters later this year.
Northern Fairfield County, which includes Danbury and neighboring towns, posted a vacancy rate of 14.9 percent. Eastern Fairfield County, which includes Bridgeport and surrounding towns, recorded a 13.7 percent rate.
As reflected in the relatively stable vacancy rates, no major companies in the past two years appear to have permanently shut down headquarters in southwestern Connecticut. But JLL officials said that some firms have been re-assessing their office footprints amid the proliferation of remote working.
“The reason behind the sort-of flat availability rate is there are so many great things happening with tenants relocating here,” Buckley said. “On the flip side, tenants are still figuring out what they need. Some of them are shrinking (their office space), and some of them are growing… But we’re not seeing any type of exodus out of Fairfield County.”