Many still feeling optimistic about Connecticut commercial real estate
Office leasing activity in southwestern Connecticut nosedived in the past quarter — but developers’ and Realtors’ confidence in the market did not.
The coronavirus crisis severely disrupted the flow of commercial real estate deals, with few major transactions finalized in a three-month span that saw a massive migration of office workers to home setups.
But the slowdown is not necessarily terminal, with brokers and landlords already seeing signs of a potential revival and developers such as Stamfordbased Building and Land Technology announcing major plans for prominent properties.
“If we can make good policy decisions and not do things to scare businesses or individuals away, then I do think we have an opportunity to have a real bump here — particularly in southwestern Connecticut because of its proximity to New York City,” said Joe
Brennan, the departing CEO and president of the Connecticut Business & Industry Association, in an interview.
Dropoff in deals
As swathes of the economy temporarily shut down in response to the pandemic, Fairfield County’s leasing volume from April through June plunged 29 percent from the first quarter of the year, according to a new report from commercial real estate firm Newmark Knight Frank.
Some areas saw particularly pronounced declines. In Norwalk, “almost no leasing took place” in the second quarter, Newmark officials said in the report.
For the quarter, the county’s vacancy rate ran at 27 percent — about the same as the level in the first quarter of the year and in the same period last year.
Amid the inactivity, some significant agreements still materialized. In Fairfield County’s largest new lease of the first half of the year, Greenwich Education Group agreed to take about 70,000 square feet at 201 High Ridge Road in Stamford.
In New Canaan, the parent company of Bankwell signed a 10-year lease to take the entirety of an approximately 30,000-squarefoot building in the downtown.
At The Ridge in Danbury, Cadenza Innovation agreed on a deal for about 17,000 square feet.
Taking advantage of its proximity to New York City, Greenwich churned out several smaller leases, including one for Owl Rock Capital Partners to take nearly 11,000 square feet at the waterfront campus The Anchorage.
“We are seeing bright spots in Greenwich and Stamford, with a lot of inquiries that can potentially translate into more leases in the third quarter,” said Karolina Alexandre, a Stamfordbased research manager with Newmark.
New projects emerge
At the same time, new commercial real estate ventures are coalescing.
Stamford-based Building and Land Technology announced this week that it would explore new proposals that could total up to 1 million square feet of development on the 14-acre peninsula that it owns in the city’s South End.
In 2014, hedge fund giant Bridgewater Associates abandoned a plan to relocate its headquarters to the peninsula from Westport, in response to widespread opposition. Many residents and local officials were incensed by the 2011 demolition of a boatyard on the site, while others were upset about the prospect of the state supporting the relocation with more than $100 million in taxpayer-funded subsidies.
BLT’s press release about the peninsula project included a statement of support from Gov. Ned Lamont, but officials at the state Department of Economic and Community Development said the agency would not be involved in formulating new site plans.
“There is no (state) role right now other than helping showcase the state,” said DECD spokesman Jim Watson.
The BLT announcement appears to reflect the firm’s belief that the pandemic will not permanently stymie the migration of companies to Stamford, which has seen a number of major corporate relocations and expansions within the city in recent years.
BLT officials said that in the past two months they have seen a significant increase in interest in leasing office space in Stamford. Among its office properties throughout the city, it owns an approximately 500,000square-foot complex at 1 Elmcroft Road, which is yards from the peninsula and houses its own offices.
“Not surprisingly, most of the interest and transactions involve families and employers leaving Manhattan to take advantage of all that Stamford has to offer,” said BLT Co-President Ted Ferrarone. “We expect this trend to continue for the foreseeable future.”
Many commercial real estate agents similarly anticipate that the pandemic’s long-term economic impact will entail cities such as Stamford becoming more attractive to companies with large numbers of employees who live in southwestern Connecticut.
“(Companies) don’t want them working from home forever, but they sense that working closer to home might keep that productivity and keep employees happy,” said James Ritman, a Stamford-based executive vice president and managing director with Newmark. “And others are coming out of the city because they want to diversify their headcount and not have them all in Manhattan.”
Gradual return
In the meantime, office building owners in southwestern Connecticut have made changes to their properties to comply with new guidelines on social distancing and hygiene.
While tenants are in charge of their respective workplaces, landlords are responsible for maintaining common areas in office buildings such as lobbies and elevators, according to state regulations.
Landlords such as Rubenstein Partners — which owns the downtown office tower at 600 Washington Blvd., and the Shippan Landing campus in the city’s Shippan section — have made other upgrades such as improving airflow, adding more touchless building components and creating more green space.
At Shippan Landing and 600 Washington, tenants have so far returned at about 15 percent to 20 percent of their pre-pandemic populations in those buildings, according to Rubenstein officials.
“Generally, smaller tenants (taking 2,000 square feet to 10,000 square feet) are occupying their spaces at a higher percentage than larger tenants, who continue to utilize work-from-home protocols,” said Rubenstein Senior Vice President Peter Gottlieb. “We are seeing a significant increase in inquiries and tours from smaller, New York Citybased tenants seeking a suburban location.”
Empire State Realty Trust reported that by the week of July 13, tenants’ employee levels had risen to 40 percent of pre-pandemic levels across its Stamford office properties, which include First Stamford Place and Metro Center.
“Having said things about remote work being great in some instances, in other cases it’s not so optimal,” said Rick Gibbs, a performance specialist with HR services firm Insperity. “I think it’s going to continue to move in the direction of people getting back to regular workspaces — but with the caveats of (factors including) kids at home and what happens with schools.”