It’s been a case of “two steps forward, one step back” for Fairfield County’s office market over the past several quarters, according to Sean Cullen, director of research at Colliers International’s Stamford office.
According to the firm’s fourth-quarter report, after recording moderate gains in each quarter of 2017, the county’s office market gradually gave back those advances in 2018. The availability rate’s most recent low of 23.2 percent was reached at the end of 2017, but was up to 24.7 percent at the end of 2018. That increase came despite leasing activity rebounding 33.8 percent from a sluggish third quarter, reaching 890,432 square feet against the third quarter’s 665,659 square feet.
The fourth-quarter 2018 figure pales against the final quarter of 2017’s 1,465,232 square feet, but Jeffrey Williams, executive managing director at Colliers’ Stamford office, explained that much of that difference came down to a single factor: Charter Communications’ October 2017 announcement that it was building a new 500,000-square-foot headquarters in Stamford.
“Our market is not that big, like New York City is,” Williams said. “One deal like the Charter deal can skew the numbers greatly, while a 500,000-square-foot deal in New York wouldn’t have nearly the same impact.”
Colliers divides its Fairfield County data into five subsectors: Eastern, Central, Greenwich, Stamford and Northern. “Eastern is one of the stronger ones,” Cullen said. “Even though it’s one of the smaller ones, it’s encouraging to see that it’s continued to grow slowly and steadily.”
The Eastern submarket continued to have the lowest availability rate in the county for the fourth consecutive quarter. Plans to convert the vacant 250,000-square-foot office building at 48 Monroe Turnpike in Trumbull are still pending, but Cullen said that if approved the project will likely help the Eastern submarket to continue to improve.
The Central submarket’s availability rate dropped from an all-time high of 27.3 percent in the third quarter of 2018 to 26.8 percent. Leasing activity reached its highest point since 2013, in part due to Reed Exhibition subletting 93,899 square feet from GE Capital Group at 201 Merritt 7 in Norwalk.
However, Cullen noted, as that space was never formally marketed, any positive impact on Central’s availability rate was negated.
“Norwalk continues to do well,” he said, “especially in its downtown. But the towns on the periphery are still having a difficult time. There’s a lot of available space still, but it’s the biggest market in the county. We think (a positive turnaround) will happen soon.”
Greenwich continues to outperform, with leasing activity 27.5 percent higher than its trailing five-year quarterly average. As a result the submarket recorded its eighth consecutive drop in availability rate to 14.7 percent, a low not seen since the start of 2009.
Colliers breaks Stamford into central business district (CBD) and non-CBD sectors. The CBD was essentially flat from the third quarter of 2018 as its availability rate rose to 32.6 percent. Announcements like the ones by Charter and jobs site Indeed — which in December said it would be adding 500 jobs to its Stamford location at 177 Broad St. — bode well for the future, Williams said.
Healthier leasing activity, along with approved plans to convert a portion of 201 High Ridge Road to senior housing, combined to push down the Stamford non-CBD’s availability rate to 27.8 percent. Nevertheless, Cullen said his firm remains less bullish on the city’s non-CBD than its CBD. “It’s still true that the further you get from (Stamford’s) train station, the more difficult it can be to attract businesses and people,” he said.
With Summit Development’s $17 million acquisition of the 1.4 million-square-foot Matrix Corporate Center at 39 Old Ridgebury Road in Danbury last October, the northern submarket may be on the verge of great things.
“That property alone accounts for about a quarter of total inventory in the northern subsector,” Cullen said. However, Williams added, Summit’s plans to convert nearly half of the property, now named The Ridge at Danbury, into residential units could affect availability numbers in the future. The approximately 750,000 square feet of commercial space that remains is being marketed as Class A office, which has pushed the availability rate from 15.9 percent to 29.3 percent.