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As we enter 2009 the Stamford office market has sunk to its worst level in 17 years. What once was the fast-growing center of the Fairfield County office market is now the laggard in the region. The availability rate for multi-tenanted office space has soared to 25.1 percent, based on our recently completed survey of Stamford”™s major office properties. This is the highest level since the inception of the annual survey in 1993. There are now 10 buildings in Stamford with 100,000 square feet or more of available office space. The weakness is present throughout the entire city, from downtown to the waterfront as well as the Merritt Parkway vicinity.
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A careful review of Stamford”™s office market however, indicates that the weakness did not commence with the emergence of the credit crisis in the summer of 2007. In fact, since 2000 Stamford has performed poorly. The city recorded negative office space absorption in six of the last nine years. During this period occupied office space dropped by more than 1.7 million square feet. What should have raised concerns is that the Stamford office market performance did not track the vigorous expansion witnessed in many other sections of the region. For example, last year midtown Manhattan”™s availability rate stood at a healthy 7.7 percent whereas Stamford was already languishing at 21.2 percent.
Interestingly, the decline in the Stamford market has been entirely related to demand deterioration instead of increases in supply resulting from new construction. Significantly, no speculatively constructed multi-tenanted building has been completed in Stamford since 1990. Paradoxically, the sharp drop in demand occurred as Stamford made visible infrastructure improvements: its housing base was expanded, especially much needed multi-family units, and a more vibrant downtown has been created.
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Most people are not aware that Stamford”™s economic base was essentially restructured over the last 15 years. Once the home for one of the largest concentrations of Fortune 500 companies, only Pitney Bowes headquarters remains. Stamford”™s successful transition to a financial services center has been a mixed blessing. While the financial services sector has created numerous high-paying professional jobs, reliance on a single industry is always risky. In the current environment the effects could be devastating.
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The shock waves emanating from the global financial meltdown will continue to be felt for some time. The open question is how Stamford”™s major financial sector employers such as UBS, GE and the Royal Bank of Scotland will ultimately react to the seismic changes occurring in their industry over the next few years.
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John E. Sheehan is principal of Delmhorst & Sheehan Inc., a real estate advisory firm with offices in Stamford and New York City. The company conducts annual market surveys of major properties in Fairfield County. Reach him at jes@delmhorst-sheehan.com.
