Optimism for state’s office market after ‘very positive quarter for Fairfield County’
Optimism for state’s office market after ‘very positive quarter for Fairfield County’
When the first wave of COVID-19 hit Connecticut in early 2020, the area’s office leasing fell into a torpor. More than a year later, real estate brokers are seeing many signs of a reawakened market.
Fairfield County recorded 117 office deals totaling about 820,000 square feet of space in the second quarter of 2021 — volume that increased about 30 percent from the first quarter and jumped 80 percent from a year ago, according to a new report from commercial real estate firm Newmark.
Stamford and Greenwich emerged as the county’s main beneficiaries of the renewed demand, taking advantage of their mass-transit connections, proximity to New York City and southwestern Connecticut’s low COVID-19 infection and hospitalization rates. At the same time, large vacancies that dot the county show the recovery is far from complete — but brokers and property owners remain optimistic.
“Q2 was a very positive quarter for Fairfield County,” James Ritman, a Stamfordbased executive vice president at Newmark, said in an interview. “Greenwich continues to lead the way. We’re starting to see a lot of spillover (in demand) from Greenwich to other parts of the county.”
Major activity in Greenwich and Stamford
During the first half of 2021, five of the six largest office transactions clinched in the first half of 2021 were in Stamford or Greenwich, according to Newmark.
In the largest deal, Encompass Digital Media renewed its lease for about 137,000 square feet at 250 Harbor Drive in Stamford. Good Nurse Productions accounted for the largest new lease, by signing for about 88,000 square feet at 419 West Ave. in Stamford.
The report also noted the popularity of Greenwich’s Central Business District, where the availability rate of Class A office space that can be leased or subleased has dropped to 3.5 percent.
Among marquee newcomers, financial-technology firm iCapital Network announced in late June that it plans to open offices this fall at 2 Greenwich Plaza, which stands next to the town’s main Metro-North Railroad station.
“There is intense competition for the remaining top-tier options, causing a growing sense of urgency in the deal process to secure space,” the report said of central Greenwich. “This has started a cascading effect, as these tenants keep getting bounced by the competition to the next-best options. Most of the demand has stemmed from Manhattan-based firms that want to split operations and open secondary offices.”
More space to fill
Despite the recent momentum, southwestern Connecticut’s office market still faces headwinds.
Newmark’s report noted that the county’s availability rate ran at a “record high” of 29 percent in the second quarter. It totaled 28.4 percent in the first quarter and 26.8 percent a year ago.
Among struggling areas, Newmark noted that the availability rate in the south-central market, including Norwalk and Wilton, reached 40 percent. In the past quarter, more than 300,000 square feet became available in Wilton, including a 172,575-square-foot block that resulted from sever
al tenant departures at the Wilton Woods campus.
“The Wilton and Norwalk markets have been hit hardest in recent years, with soaring vacancies and little new demand to offset tenant attrition,” the report said.
In a much-needed boost for the Route 7 corridor, telecommunications giant Frontier Communications recently renewed its headquarters lease at the Merritt 7 complex in Norwalk. The 48,000-square-foot deal ranked as the county’s third-largest office transaction of 2021.
At the same time, some large buildings with longstanding vacancies have spiked the availability levels. About 435,000 square feet of space is available in the 500,000-square-foot complex at 1 Elmcroft Road in the South End of Stamford, according to Newmark.
“When you have a 300,000square-foot or 400,000-squarefoot building that hits the market in Fairfield County, that’s hard to chip away at with (a lease of ) 17,000 square feet or 30,000 square feet,” Ritman said. “But with a tight market in Greenwich, that demand is coming up to Stamford. Good blocks will get leased.”
At 1 Elmcroft, the only corporate tenant is landlord Building and Land Technology’s own offices. But the property has been adapted for other uses, including the housing of classrooms for Westover School and a Stamford Health-run COVID-19 “vaccine supersite.”
BLT officials said they are planning a series of capital improvements at 1 Elmcroft that could include adding a fitness center, cafe and an entrance facing the waterfront Kosciuszko Park.
A reference point for 1 Elmcroft is the office complex at 200 Elm St.-695 E. Main St. in downtown Stamford. BLT acquired the property in 2012, after reinsurer GenRe’s move to another site in Stamford. Now, it has a tenant roster that includes Deloitte, Diageo, Henkel, RSM and Webster Bank.
“695 E. Main certainly is a good example of what we can do if we really actively pursue a repositioning of the building,” BLT Co-President Mike Handler said. “Today, it stands over 80 percent leased, and it’s home to some of the best companies in the world.”
Other BLT-owned properties in the South End have recently landed major recruits. Tomo Networks, a real estate-focused financial technology firm founded last year, has leased about 13,000 square feet at 2200 Atlantic St. Manufacturer and technology-services provider ITT announced last month that it will relocate its headquarters from White Plains, N.Y., to 100 Washington Blvd. It will take about 24,000 square feet in its new location, which stands yards from 2200 Atlantic.
“There’s certainly been a lot of interest in the Stamford market and the Norwalk market in the last six to nine months,” Handler said. “The concrete decision to move a company and lease space is really what matters, and I think you’re starting to see companies make those decisions.”