On the surface, it seemed that Fairfield County’s office market experienced a robust level of activity during the third quarter, with 980,000 square feet of leasing activity, nearly as much as the previous two quarters combined, and 46 percent above the five-year quarterly average, according to data from CBRE.
However, much of the third quarter’s vibrancy was predicated on a single deal: Charter Communications’ build-to-suit lease for 532,000 square feet at 406 Washington Blvd. in Stamford, which represented the region’s largest office transaction in more than a decade.
If one removed Charter Communications from the equation, the second-largest lease transaction of the quarter — Gartner Group’s 56,783-square-foot renewal-expansion at 700 Fairfield Ave. in Stamford — was considerably less dramatic. And the largest new lease outside of Charter Communications, KPMG LLP’s 35,848-square-foot transaction at 677 Washington Blvd. in Stamford, seemed microscopic in comparison to the mega-deal happening down the street.
Tom Pajolek, executive vice president at CBRE’s Stamford office, dubbed the Charter Communications transaction “a monster” and acknowledged that the third-quarter data was “heavily skewed and influenced” by that single transaction. He also noted that having an XL-sized single lease dominate quarterly data was “not abnormal” and deals surpassing 100,000 square feet are not uncommon in this market.
The average asking rent in the third quarter was $31.99 per square foot, which was down by less than 1 percent from both the previous quarter and the previous year. During the third quarter, Fairfield County’s 23.8 percent availability rate was mostly flat on a quarter-to-quarter measurement, with 84,000 square feet of positive absorption that was mostly focused on the two Greenwich submarkets and the Stamford Central Business District (CBD.)
The Greenwich CBD saw the greatest level of activity in the third quarter, with availability down to 9.2 percent from 9.6 percent in the previous quarter and a year-to-date availability of approximately 63,000 square feet. The Stamford CBD’s availability remained at a lofty 33.1 percent, though KMPG’s lease at 677 Washington Blvd. represented some long sought-after movement on one of the largest and emptiest properties in the region. The largest third-quarter transaction that occurred outside of Greenwich and Stamford was Louis Dreyfus Commodities’ renewal on 41,469 square feet at 40 Danbury Road in Wilton, which was the third-largest transaction of this period.
CBRE pointed out that the region’s leasing activity during the first three quarters of this year has nearly matched all of the leasing activity recorded during 2017.
“We’re tracking very well,” added Pajolek. “On a conservative basis, we will be able to achieve 2016’s leasing activity. On an aggressive basis, we could surpass 2016’s leasing activity.”
Pajolek predicted that the 2018 office market picture will end with significant fourth-quarter activity.
“We usually finish the year with a flurry,” he said. “We’re hopeful there will be one or more deals coming through. Many people think of business on an annual basis, so there is some urgency in getting a new location by the end of the year. I would like to see things ramp up from mid-October onward, and things usually do.”
CBRE noted that the Greenwich CBD and the Stamford CBD accounted for 52.3 percent of all leasing velocity in the region over the last four quarters, even as these submarkets consist of only 28.6 percent of the total existing inventory. Pajolek observed that much of the continuing popularity of these submarkets can be attributed to convenient geography.
“The transit-oriented focus was reinforced in this quarter,” he said. “That is the belief on why people are doing business here. The CBDs’ access to Metro-North is still attractive and continues to be attractive to prospective tenants.”