While commercial vacancy rates shot up in Stamford and Fairfield County during the third quarter, four leases are on the verge of being signed in Stamford totaling 700,000 square feet of space.
As measured against an anemic second quarter, office lease activity in Fairfield County rebounded in the third quarter, according to Cushman & Wakefield of Connecticut Inc., to nearly 580,000 square feet of space after leases for less than 200,000 square feet were signed in the second quarter.
Still, that was down from more than 620,000 square feet leased in the third quarter of 2008, leading up to the financial panic in October that spawned the deep recession.
In adjoining Westchester County, N.Y., leasing continued a freefall, from just more than 250,000 square feet in the second quarter to 160,000 square feet of space in the third; one-third their levels a year ago.
“Leasing activity in the fourth quarter will jump as we expect four large leases, totaling almost 700,000 (square feet), to be executed in Stamford alone,” said Jim Fagan, senior managing director and head of Cushman & Wakefield”™s operations in Fairfield County and Westchester County, N.Y. “One of them will be from outside of the county; the other three from within. Notwithstanding this activity, we”™re also expecting another year or so of soft-market conditions ”“ unemployment will continue to rise and occupancy will continue to drop.”
Commercial rents in both Fairfield County and Westchester are down 15 percent and 30 percent below their levels a year ago. In Fairfield County, nearly 800,000 square feet of space came onto the market, including abundant sublease space at subsidized prices that landlords are having to factor into their own pricing for direct leases.
The vacancy rate in Fairfield County as a whole is just shy of 20 percent, up more than two percentage points from the second quarter and up six full points from a year ago. In downtown Stamford, the vacancy rate reached nearly 24 percent.
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The only submarket to see a decrease in the vacancy rate was Darien and New Canaan, which dropped to just below 12 percent from more than 14 percent the previous quarter.
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Several large vacancies became available in the third quarter, most notably 695 E. Main St., which had been the focus of speculation due to reported financial entanglements in the Lehman Brothers Holdings bankruptcy case, and the lack of new lease activity. The 500,000-square-foot building has long served as the headquarters of General Re Corp., which is relocating its office to north Stamford. Also relocating from the building are Spencer Stuart (to 2 Stamford Plaza), Korn/Ferry International (to Canterbury Green), and Teleos Management (to 1 Stamford Plaza).
“Some of Stamford”™s landlords are benefiting from the emptying of (695 E. Main),” Fagan said. “We also expect other large relocations within the county by the end of the year. They won”™t affect the statistics, rather they will just be a continuation of this game of musical chairs.”
In an unusual flip-flop, Purdue Pharma L.P. is relocating its headquarters a second time in the past two years, as it moves back into its former offices on Tresser Boulevard after abandoning them for 1600 Summer St. farther north.
Also hitting the market is 600 Steamboat Road in Greenwich, the former offices of RBS Greenwich Capital, which has 170,000 square feet of space.
With those moves and others, some 1.3 million square feet of space were added to the market, an unusual 15 percent increase between the second and third quarters.
Following a small increase in major investment sales in the second quarter of 2009, at 30,000 square feet of space, sale activity in Fairfield County again came to a complete halt in the third quarter.
“We expected 2009 to be a difficult year for investment sales, however, there is money out there,” Fagan said. “Investors are sitting on the sidelines waiting for the market to stabilize for them to feel comfortable enough to re-invest.”