New Haven Register (Sunday) (New Haven, CT)
‘INCREDIBLY BULLISH ABOUT THE MARKET’
State’s office market gains momentum
In 2020, the COVID-19 pandemic sparked a major drop in office-leasing activity in southwestern Connecticut. In 2021, the market’s numbers moved in a much more promising direction.
Fairfield County’s volume of new office leases increased significantly last year, with Stamford and Greenwich accounting for most of the large transactions, according to new data from commercial real estate firm CBRE. The recovery is hardly complete — and the spread of the omicron variant has complicated the comeback — but the activity of the past few months has demonstrated that office space still figures prominently in many companies’ long-term plans.
“If you look at the demographics of Fairfield County, that puts us in a really good place to continue to increase our leasing activity,” David Block, a Stamford-based executive vice president at CBRE, said in an interview. “We’re getting the benefit of having these beautiful, wonderful central business districts. I’m incredibly bullish about the market going forward.”
Making major deals in 2021
For all of 2021, Fairfield County recorded about 1.7 million square feet of new office leases, up 23 percent from 2020, according to CBRE. It trailed by 13 percent, however, the county’s five-annual average of about 1.9 million square feet.
Nine of the 10-largest leasing deals last year in Fairfield County were signed for properties in Stamford or Greenwich. At No. 1, tobacco giant Philip Morris International signed a lease for more than 71,000 square feet at 677 Washington Blvd., in downtown Stamford. The No. 101 firm on last year’s Fortune 500 list plans to open the new headquarters later this year.
“For us to succeed, our employees need to be in a place that is personally and professionally enriching — and we believe Stamford is just that place,” Deepak Mishra, president of the Americas region for PMI, said at a press conference last November at 677 Washington.
Digital Currency Group, which focuses on cryptocurrencies and blockchain technology, accounted last year for the county’s second- and thirdlargest transactions. It signed new-lease and expansion deals for its under-construction headquarters covering about 90,000 square feet in the Shippan Landing complex in Stamford.
“We’re excited about building something really special here in Stamford,” DCG founder and CEO Barry Silbert said at a press conference last November at the company’s future headquarters at 290 Harbor Drive. “We believe Stamford has the infrastructure, resources and talent to create a hub for the next generation of fintech and crypto companies.”
Fairfield County’s officeavailability rate has not fluctuated dramatically during the pandemic — a sign of companies’ preference for longerterm leases. In the fourth quarter of 2021, the availability rate totaled 25.9 percent, compared with 26.5 percent in the same period in 2020 and 23.6 percent at the end of 2019.
Among submarkets in
southwestern Connecticut, the availability rate again ran the lowest in the Greenwich central business district, at only 7.4 percent. In the largest new lease signed last year in Greenwich and the fifth-largest in the county, alternative-asset management firm Apollo Global Management committed to taking more than 43,000 square feet at 100 W. Putnam Ave., in the central business district.
“Despite the natural fluctuations of the economy, central Greenwich has always been a desirable destination for businesses and for office space,” Marcia O’Kane, CEO and president of the Greenwich Chamber of Commerce, said in a recent interview. “Since this area is dense with a wide variety of businesses, everyone benefits when leasing rates go up. Restaurants, catering, retailers and nightlife all enjoy a surge from having more consumers in the area who have a demand for these items.”
The central Fairfield County area, which includes the Darien-Norwalk-Westport-Fairfield corridor, again grappled with the county’s highest submarket availability rate, at 32.5 percent. The availability rate ran at nearly 32 percent in Stamford, not including the central business district; at about 28 percent in the Stamford central business district; and at around 24 percent in Greenwich, outside the central business district.
“Looking at the incredible momentum we have, we want to continue to work to attract businesses and high-paying jobs for residents in our city and work to reduce the (approximately) 30 percent commercial vacancy rate that we have,” new Stamford Mayor Caroline Simmons said in a Jan. 20 forum hosted by the Stamford Chamber of Commerce.
Northern Fairfield County, which includes Danbury and several neighboring towns, posted an availability rate of 11.5 percent. Eastern Fairfield County, which includes Bridgeport and a few towns, recorded a 21.9 percent rate.
In the fourth quarter, Fairfield County’s average asking rent totaled $34.58 per square feet, on an annual basis — down 3 percent from the previous quarter and down 1 percent from one year ago.
“Since there was so much high-quality, high-priced space leased this year, it actually caused the price to come down,” Block said. “Pricing is not really a supply-demand issue; it’s a supply issue. When high-priced space is leased, it causes the asking price for available space left to come down.”
Cautious optimism
In recent weeks, the omicronfueled resurgence of COVID-19 cases has forced many companies to adjust their office plans.
But many firms are reluctant to shut down their offices as they did during the first wave of the pandemic. In contrast with two years ago, COVID-19 vaccines are now available — and Connecticut has one of the highest vaccination rates among the states.
Omicron has contributed to a recent slowdown in leasing activity — but it will probably not be disruptive in the long term, according to Block. After COVID-19 infection rates and hospitalizations in Connecticut surged in December and early January, those numbers have declined significantly in the past week.
“I think it’s just a short pause simply because people do not necessarily want to be out there shaking hands with strangers, getting into elevators and walking through space right now,” Block said. “I would be surprised if leasing activity in 2022 doesn’t surpass 2019.”