Commercial real estate in Fairfield County was booming in 2019 and will likely do even better in 2020, according to Jim Fagan, a managing principal of Cushman & Wakefield who oversees its Stamford and Westchester County offices.
This is a good thing, he is quick to add, as its vacancy rate remains high. Fagan said it stands at 26.7% but is expected to drop to 23.5% next year as tenants begin to occupy the space they committed to in 2019.
That may look encouraging, but there is still plenty of work to be done. Over the summer, it was reported that the office vacancy rate nationwide had fallen to 12.2%, the lowest it had been in 18 years.
Fagan said a large part of the problem is workforce stagnation.
“Since 1989, Connecticut has had 1.67 million people in the workforce,” he said. “In 1999, it was 1.67 million. In 2009, it was 1.67 million. And in 2019 it’s the same number. Over that same period you’ve seen a 35% workforce increase in New York and a 60% rise in Austin.
“If we had just a 10% growth over those 30 years, or 3% every 10 years — which is not that aggressive — the state of Connecticut’s economy would look much brighter.”
Fagan said such growth would fill some 20 million square feet of office space, “so that we’d have a shortage instead of the glut that we have now.”
The much-ballyhooed millennial effect is still very much in force in the county, he noted.
“Twenty years ago, it was safe to say that business north of the Merritt Parkway was very much in vogue,” Fagan remarked. And those looking to live there were very much of the NIMBY (not in my backyard) attitude when it came to the proximity of mass transit, shopping and the like, he added.
Today, he quipped, “Millennials are walking around as if they rent the place.”
That demographic very much wants services “in their backyard” and are willing to pay increasing rents to live in downtown areas like Stamford’s. The result, Fagan said, is that more companies are looking to take space in those areas as well, both to attract new talent and retain current employees. And that trend will only increase, he said, noting that within the next two years, 50% of the U.S. workforce is expected to be made up of millennials — and will increase to 75% by 2030, according to the U.S. Bureau of Labor Statistics.
Fagan characterized what BLT has done in the south end of Stamford, especially its 10-year-old Harbor Point development, as “just awesome,” and cited such other commercial activity as WWE, KPMG and Perkins Eastman moving to the long-underused, 700,000-square-foot former UBS building at 677 Washington Blvd. in downtown as proof that that city is on the right track.
Fagan also said that a “major announcement” of a brand-new building composed of another 700,000 square feet would likely be made over the next 30 to 45 days. That points to how “a lot of the building stock (in Stamford) needs work,” he said. “If big tenants are saying they’d rather build something new, which is significantly more expensive than going with an existing one, that really says something.”
As for other major markets in the county, Cushman reports that the overall vacancy in Greenwich increased by 1.2% over the last 12 months — mostly due to a rise in sublease space in its central business district (CBD) market — while leasing activity in Westport more than doubled from 2018 thanks to new transactions (a 4.4% vacancy-rate decrease).
Greater Danbury has the second-highest overall vacancy rate in the county at 30.9%, Fagan said, which is mainly attributed to the massive building once known as the Matrix Corporate Center, which accounts for approximately 78.1% of all the available space in the greater Danbury submarket. Purchased in 2018 by Summit Development for $17 million, or $16 per square foot and renamed The Ridge at Danbury, the building’s potential remains promising, Fagan said.
Also worth watching is Norwalk’s SoNo Collection, he said, noting that while initial reaction has been almost universally positive, it will take some time to judge its success. That the owners of the Stamford Town Center announced it was up for sale at almost the same time the Norwalk mall opened represents some interesting possibilities, Fagan said.
“Very few people expect it to be in its current state five years from now,” he said. “There’s an awesome opportunity there for the state to step in and expand the University of Connecticut’s presence in Stamford. University cities are very hot right now.”
All the infrastructure for student housing or other university uses is already in place at the 853,000-square-foot facility at 100 Greyrock Place, he said. “That could be a once-in-a-lifetime opportunity.”