Office vacancy rate rises, but pockets remain lively
Driven by the vacancy of FactSet’s former headquarters in Norwalk, Fairfield County businesses and landlords put nearly 800,000 square feet of office space back on the market last year.
With that comes a silver lining in the form of downward pressure on rents for tenants seeking to renew or find new space.
In December, FactSet relocated more than 900 employees to The Towers complex in Norwalk from the nearby Merritt 7 Corporate Park. The company provides analysis on market dynamics to the investment industry.
It was one of three major relocations afoot in Connecticut’s southwestern corner, alongside WWE’s planned move to the former UBS building at 677 Washington Blvd. in Stamford from its longtime headquarters near the Darien line; and liquor giant Diageo abandoning its own Towers building in Norwalk, splitting hundreds of workers between Stamford’s 200 Elm St. office building and its new U.S. headquarters in New York City.
Across Interstate 95 from the UBS building, construction is proceeding on a new headquarters complex for Charter Communications, the nation’s second largest cable carrier, which will relocate from its existing Stamford offices.
As tracked by the Stamford office of commercial brokerage Cushman & Wakefield, only one other transaction occurred last year in excess of 100,000 square feet of space — Goldman Sachs Group renewed its lease at 1 American Center in Greenwich, just off
Interstate 684 on the New York border.
Greenwich’s outlying office parks were one of just three submarkets where Cushman & Wakefield calculated a positive absorption of office space in 2019. Tose gains were more than offset by downtown’s 10 percent reduction. Stamford had only a slight decline in its office vacancies.
“Companies are ... crowding into that section of (downtown) Stamford that’s all around the train station,” said Jim Fagan, managing director of Cushman & Wakefield. “It appears that the former RBS building is mostly leased, and the former UBS building is making good progress.”
Westport and Trumbull led the Fairfield County market, with both filling more than 3 percent of their available office space over the course of the year. The towns were the lone locales regionally where average rents rose more than 2 percent since last winter.
While the Trumbull gain was the result of a few individual leases, Fagan said the Westport increases suggest the town’s continuing appeal to smaller, entrepreneurial companies led by seasoned executives who want shorter commutes from their homes, compared to available options in Stamford, Norwalk or other locations.
OperationsInc was among the companies to get a new set of Norwalk office fobs this month, moving cross-town to the MerrittView building on Main Avenue, nine years after the human resources training and consulting firm arrived at its former 535 Connecticut Ave. office.
“Given that the commercial real estate vacancy rate is still around the same ... that it was 2011 when we last shopped, the level of competition for our tenancy was still pretty high and comparable,” OperationsInc CEO David Lewis said. “The most concerning thing we saw involved some buildings (which) could not get bank financing to cover our build out.”
Fairfield County’s overall vacancy rate rose 2 percentage points to 28.5 percent. The Southport section of Fairfield had the lowest vacancy rate in the county at 11 percent. Norwalk was the highest at 35 percent, influenced in part by Diageo’s departure and the downsizing of GE Capital.
The biggest trend in Connecticut, and with significant implications for the Fairfield County office market, according to Fagan, is the ongoing efforts by companies to recruit qualified workers in the millennial generation and retain them once they are successful doing so.
He suggested Stamford’s and Norwalk’s efforts to create apartments and entertainment options should eventually spill over into more people choosing to make Connecticut their permanent home, and make more employers want to establish offices here to tap that workforce.
“As the millennial population ages, while it has been postponing family formation, it can’t postpone it forever,” Fagan said. “As they get into that phase of their lives, they are going to move to the suburbs. I think they are going to move fast to the suburbs, and I think this is an awesome place to live. The question is whether it is awesome enough.”