Not surprisingly, Fairfield County’s office market took a dive in the first quarter, with leasing activity plummeting by 26.1% from the previous first quarter, according to a new report by Newmark Knight Frank.
Leasing activity for the quarter totaled 650,000 square feet, compared with 1.1 million square feet in Q4 2019. The report noted that, while first-quarter activity is typically slow, the effects of the COVID-19 pandemic obviously were felt. By the end of March, most investment and leasing activity had been put on hold, NKF said.
The county’s overall availability rate rose to 26.8% from 26.6% last quarter, with net absorption down by 76,000 square feet. That was due primarily to the 132,000 square feet added by Purdue Pharma after renewing for 104,000 square feet at One Stamford Forum. Since 2014, Purdue – still working its way through myriad lawsuits over its marketing of opioids – has reduced its footprint by over 380,000 square feet, or 75%.
Its latest addition resulted in a 1.8% increase in the Stamford CBD’s Class A availability rate, to 29.2%. The Purdue renewal was the county’s only deal for over 100,000 square feet during the quarter. Only one deal – Industrious’ opening a new location totaling 30,338 square feet at 100 W. Putnam Ave. in Greenwich – tracked in the 25,000- to 50,000-square-foot sector. That led to a 1.3% decrease in Greenwich CBD’s Class A availability rate, to 15.2%.
Ninety deals involved less than 10,000 square feet, compared with 65 in the previous quarter and 76 in Q1 2019. Only eight deals totaling 130,000 square feet were completed for spaces of 10,000 to 25,000 square feet, most of which took place in downtown Stamford. Those included Wofsey, Rosen, Kwenskin & Kuriansky’s 15,000-square-foot renewal at 600 Summer St.; Spencer Stuart’s 14,350-square-foot new lease at 677 Washington Blvd.; and Gerald Metals’ new 14,110-square-foot lease at 750 Washington Blvd.
Meanwhile, deals for less than 5,000 square feet represented almost 30% of the quarter’s total leasing.
With the exception of Greenwich non-CBD, all suburban markets posted year-over-year increases in leasing activity. Norwalk’s leasing numbers were moderately enhanced with several deals signed at Merritt 7: a new 24,000-square-foot lease by Forrester Research, a 16,500-square-foot sublease by North Mill Equipment Finance, and a 9,333-square-foot expansion by Homeserve USA.
All told, 90,000 square feet was recorded in that market, though availability remained unchanged at 35.5% and absorption ended flat as nearly the same amount of space came online, including 40,000 square feet at 200 Connecticut Ave.
In Westport, Iridian Asset management renewed for 9,205 square feet at 276 Post Road West, and Kaia Yoga Center signed a 9,276-square-foot deal at 1200 Post Road East. In Southport, Lincoln Healthcare signed a renewal and expansion of 8,400 square feet at 3530 Post Road. Class A availability continued to decline over the past year to 13.7%.
Availability in the eastern market increased from 15.1% last year to 17.3%, due mainly to the addition of nearly 40,000 square feet left over from Hubbell at 40 Waterview Drive in Shelton.
The northern market saw a 15.7% year-over-year leasing gain, adding 30,000 square feet to its occupancy and dropping availability by 1.8% to 28.9%.
Looking ahead, NKF noted that some deals far along in the pipeline pre-coronavirus have been put on hold or abandoned in favor of short-term rentals.
Most investors and lenders are taking a “wait-and-see” approach, while several open questions – whether tenants will push back against open floor plans and tight, shared office desks, as well how remote working affects productivity and collaboration – remain.
NKF further noted that the federal government’s efforts at stimulating the economy could lead to a real estate rebound beginning in late 2020 and continuing through 2021.