The strong demand for commercial real estate in Greenwich has been driving office leasing activity in Fairfield County.
The perennial appeal of Greenwich has led to a significant tightening in the Greenwich commercial business district (CBD) office market. Pricing has not quite come back to 2007 levels, but we are seeing a movement back toward those levels. In contrast to the Greenwich CBD office market’s tightening, tenant downsizing and relocations in Stamford and Norwalk increased the vacancy rate in those markets.
When we look at the southwest and central part of the county, including Greenwich and Stamford, these markets have seen the largest year-over-year increases in leasing demand, rising up to 72.3 percent and 45.6 percent, respectively. While Stamford continues to lead the county in overall lease volume with more than 390,000 square feet in new leases in the second quarter of 2018, this total also revealed a slight downward trend year over year. This year’s number was 18.8 percent lower than second quarter 2017 levels. Stamford also experienced the largest increase in vacancies year over year, rising 390 basis points to 30.6 percent, due largely to tenant relocations and consolidations.
In Fairfield County, leasing surged, surpassing third-quarter demand in 2017 by 63.6 percent with 907,849 square feet transacted. Stamford led the county in transactional volume, accounting for approximately 53 percent of the total square footage leased. Greenwich also saw an increase with a nearly 27 percent year-over-year increase in year-to-date demand.
There are about 10 buildings in the Greenwich central business district that seem to have outperformed the market by a substantial amount.
Their rents are probably between $85 and $120 per square foot, which in many cases is double, if not more than, the rest of the marketplace. The draw for these properties is that they’re all within walking distance of the train station and they’re all near Greenwich Avenue.
A few examples are Pickwick Plaza, 600 Steamboat Road, 33 Benedict, 100 W. Putnam Ave., 55 Railroad Ave., Fawcett Place and Greenwich Plaza. The bottom line is firms that want to be in one of these buildings are willing to pay the higher rent. Many of these tenants are trying to attract the best and the brightest human capital to work for their companies. They view the location and being close to Metro-North and Greenwich Avenue as a draw for that talent. For those employees who live in New York and work in Greenwich, it makes the reverse commute fairly quick and convenient.
The overall vacancy rate in Fairfield County for the third quarter was 24.6 percent, which was up from 23.6 percent for the third quarter of 2017. While Stamford saw the largest increase year over year, strong tenant demand in Greenwich pushed its CBD vacancy rate down to 9.8 percent, the lowest level in over five years.
Rents in Fairfield County averaged $32.21 per square foot, a decline of $1.57 per square foot over the last 12 months.
The Greenwich CBD market included significant leases at 55 Railroad Avenue and Pickwick Plaza.
As we look to the future, we see a tremendous amount of activity in Greenwich, Stamford and lower Fairfield County. Currently, we are aware of a few firms that are each actively seeking more than 100,000 square feet in the marketplace.
The brightest spot in the marketplace is that the vacancies we are seeing are in quality buildings that are undergoing wholesale renovations to meet the demands of the millennial workforce. The ownerships in this market are seeing that if they create a wonderful product that is in line with what companies want and that will help companies attract and retain quality talent, then that space will become leased.
With leasing activity projected to stay on pace with last year, we expect vacancy levels to continue to rise in the short term as tenants use their space more efficiently, but we also expect transportation-oriented markets like Stamford to begin improving as tenants take advantage of the increasingly vibrant aspect of the communities.
Jim Fagan is the managing principal in Stamford, Connecticut, and Westchester County, New York, of Cushman & Wakefield, a commercial real estate services company. He can be reached at Jim.Fagan@cushwake.com.