Retail expansion in Fairfield County is expected to hold strong this year, according to the just-released 2017 U.S. Retail Investment Forecast from commercial real estate brokerage Marcus & Millichap.
The report noted that expansionary efforts have been underway across the region in response to residential growth, led in 2016 by grocery-anchored shopping centers in towns such as Shelton and New Haven County’s Naugatuck. This year development is expected to ease back from the highs of the last two years, placing the vacancy rate back on a downward trajectory for 2017.
Builders are placing greater focus on the commuter towns of Fairfield County, with Marcus & Millichap singling out the largest mixed-use project of the year, Bedford Square in Westport, as an example. “With roughly half of upcoming deliveries preleased, retailers are looking to capture the strongest anticipated retail sales growth in half a decade, holding vacancy in the low-5 percent territory, contributing to another year of asking rent gains,” the report stated.
Marcus & Millichap further predicted that buyer activity will be widespread across the region, with greater transaction velocity in Stamford and Greenwich, where cap rates average in the mid-5 percent band. Institutional buyers commonly focus on assets in those areas, the report stated, which pushes yields lower for premium listings near highly trafficked transit routes.
Farther into the suburbs along Interstate 95, properties can exchange for 200 more basis points, attracting a large pool of local and out-of-state private investors; the report said that competition is likely to rise this year as construction ebbs, holding deal flow at elevated levels as a large pool of buyers look to capitalize on strengthening operations across the county.
Among the report’s predictions for Fairfield and New Haven counties combined this year:
- Following the loss of about 3,200 jobs in 2016, employers will hire 6,500 workers this year, for an overall increase of 0.8 percent.
- In the wake of the 520,000 square feet of construction completed last year in the two counties, deliveries will drop this year to 410,000 square feet, with the majority of new space rising in Fairfield County.
- Subdued construction will support a compression in the vacancy rate to 5.3 percent, a continuation from last year’s 10-basis-point drop.
- Tightening vacancy will contribute to a rental-rate increase this year of 3.5 percent, ending 2017 at $22.19 per square foot. A 4.2 percent rise was registered in 2016.
- With more New York City workers expected to take up residency in the commuter towns of Fairfield County, retail assets along major travel routes and near transit stations will be in strong demand.