Robert Caruso’s office overlooks Tresser Boulevard in downtown Stamford, and the view is a testament to a robust commercial property market: office complexes, retail offerings and an under-construction multifamily development is just beyond the window. From the distance, all looks well. But just how solid is the local property scene?
For this edition of Suite Talk, reporter Phil Hall spoke with Caruso, senior managing director of CBRE regarding the commercial real estate market in Fairfield County, both on its own terms and in comparison with Westchester.
How would you categorize the overall state of Fairfield County’s commercial real estate market?
“Let’s start with multifamily, since multifamily has been on fire. In Stamford in particular, we’ve added 5,200 residential units since 2010 and we have 1,100 under construction.
The occupancy rate is 95 percent. We have an ‘If you build it, they will come,’ and it has done a lot for Stamford because we have a whole influx of millennials and others who enhance the already talented workforce we have in Fairfield County.
In terms of retail, we have retail construction at the mall in Norwalk, which I believe is only one of two new malls being built in the country. So far, they’ve only announced Bloomingdale’s and Nordstrom as tenants. When you think about retail in higher-end markets, obviously there is Greenwich Avenue and Main Street in Westport — both of those had a lot of availabilities. You’ve seen some of the rents change, especially in Greenwich in the nonprime locations, and those are starting to become more active.
Westport, in particular, which has been very quiet due to the uncertainty around the mall, we’ve seen some deals signed there recently.
You have two things going on in retail: restaurants and fitness, sort of experiential retail.
They have done very, very well with a lot of leasing activities, to the point where you’ve soaked up almost all of the prime locations for those sorts of things. We still see some softness in fashion and soft goods — the lease terms have shrunk, but are still active, although everyone wants to test things out. Instead of 10-year deals, you are seeing ones and threes and fives — it is almost like pop-up retail in the city, where if something works they will be more confident about committing.
There are a few things going on in office space. The biggest news is Charter, which is building a new building. Construction for office space doesn’t really make sense right now, cost-wise, both for the land and the construction costs, unless you need something very specific. In Charter’s case, they wanted something very specific that didn’t exist so they are building a custom building for themselves. In Greenwich, it has become very tight and overall ability is under 10 percent. As people cannot find what they are looking for in Greenwich, they will move potentially to Stamford, where there is opportunity and lower costs. And you’ll see rents drop in Greenwich, but it is not a sign of the market weakening — it is a sign that all of the good, really high-priced spaces being taken.”
How does Fairfield County’s market compare to the Westchester market?
“In terms of multifamily, they probably have 3,000 units in White Plains since 2010, so you’re seeing more growth in Stamford. And the millennial population in Stamford is growing faster than the population in White Plains, Jersey City or Hoboken. Stamford is getting a real push that is coming together at the same time: a lot more newer units being built at a lower cost, high-quality transportation, and you’re seeing the benefit of the nightlife in Stamford. It has become a much more energetic environment with a good workplace balance.”
What about the other cities in Fairfield County that often get overlooked when discussing this subject: Shelton, Danbury and Bridgeport?
“Shelton is in the east and it is the tightest market of all of them. Like Greenwich’s downtown, availability is under 10 percent. Danbury is dominated by one building right now: Matrix Corporate Center, the former Union Carbide headquarters that we’ve been marketing the property for sale. When the new owner closes, we will evaluate what is best to do on that place. Bridgeport isn’t a traditional office market. You may see some due to its access to roads and labor, but there is not necessarily a lot of high-quality space there. To build a lot of new space is challenging.”
Is there an active push by the local governments and developers in Fairfield County to attract businesses from the neighboring counties?
“For the neighboring counties, you don’t have a ton of movement between the counties unless there is something incentive driven. You’ve seen a few move over the years from Westchester to Connecticut. You’re seeing people kicking the tires now, which had been quiet for a while. Also, there is movement within the county; for example, Tudor moved Greenwich into Stamford.”
What are the growth industries for Fairfield County?
“Financial services and insurance are still a large scene. Digital media and technology companies continue to add space.”
So many people in Connecticut complain that it is not a business-friendly state. Is that a fair thing to say?
“The unemployment rate has gone down quite a bit. For the county overall, it’s a little bit above the national average — on unadjusted measurement, 4.3 percent for Fairfield County in July versus 4.1 for the national average. Stamford is 3.9 percent, so Stamford is doing better than the national average.
But there is the issue the state has with the unfunded pension liabilities and the estate tax. When people are doing their financial planning, the first thing their financial planners say in regard to the estate tax is ‘Move!’ The uncertainty has been an issue and we’re hoping as the election happens everyone realizes uncertainty isn’t good.
I hope both sides of the aisle can come up with a plan. I don’t know if there is a short-term magic bullet. But Fairfield County has so many things going for it, in terms of quality of life that there are a lot of reasons that people want to be here.”
You mentioned the millennials. Do you see them staying in Stamford or will they follow the lead of earlier generations and move to the suburbs once they have families and financial security?
“I think you’re going to have both. Now, we have good housing stock for young people. I think you will see people moving from Manhattan to the suburbs. Many of the millennials put off having children because of the Great Recession, so you are starting to see household creation from those millennials. It is such a large market in Manhattan that even if we get some spillover, you’ll see housing stock improve dramatically.”
We didn’t touch on the industrial sector of commercial real estate. Where does that stand locally?
“Most of the growth in industrial has been around logistics. In Fairfield County, there is not a lot of high-quality logistics space. Most of it is either around the ports, and New Jersey has been a huge beneficiary of it. Plus, the land prices are pretty high and that’s not conducive to real growth in industrial and manufacturing.”
What do you see as the trends that will impact commercial real estate in the near future?
“Agility is becoming really important. You’re seeing that in the design of space as well as the way the structure of leases and optimizing for your business leads. In Manhattan and now in Connecticut, you’re seeing a tremendous growth of coworking spaces.
One more trend that we saw first in Westchester and we are seeing in Fairfield County as well is the repurposing of office stock to use for colleges, medical facilities and all sorts of uses. In Westchester, Fordham University took a building and Sloan-Kettering took a building. And in Fairfield County older office buildings are being ripped down for residential use. This removes lower-quality and functional-obsolete properties.”
After this interview, I have to get back on I-95, which many people do not view as a pleasant experience. Has the local transportation situation impacted the growth of the commercial real estate market?
“Our connectivity to New York, especially with the train, is important. It’s one of our strengths. They have done quite a bit of work on I-95 in commuting in from the east, reworking exit ramps, probably improved the flow of traffic. There are benefits to being in the Northeast, but there are also challenges.”