John E. Sheehan: Trends in the Fairfield County office market

As the first quarter of 2018 concluded, no clear direction emerged in the Fairfield County office market. The market remains sluggish despite a robust national economy. State fiscal woes and unsolved transportation issues have exasperated market weakness.

During the past year, the sales market for office structures remained reasonably active with opportunistic buyers leading the way. Three sales deserve particular note because of their significance and what they mean for the entire marketplace.

GE”™s decision to relocate to Boston and sell its long-term headquarters in Fairfield marked the end of GE”™s enormous presence in the county. Sacred Heart University purchased the campus containing 172,000 square feet on 60 acres for $35 million. The sale also signaled the near completion of the movement away from the remote campus ”” style headquarters environment that was so popular in the 1970s and 80s as New York City slumped. On a more positive note, the sale highlights the strength of Connecticut”™s university infrastructure with Sacred Heart continuing its rapid growth.

The second significant transaction was the sale of the former UBS office complex located at 677 Washington Boulevard in downtown Stamford. The vacant complex containing 700,000 rentable square feet was purchased by its lender underscoring how weak the market has become. The effective cost, inclusive of the acquisition of debt and underlying land, translated into an approximate price of $95 million or $135 per square foot. Although viewed by some to be a “white elephant,” one should not be surprised that sophisticated corporate real estate experts will recognize the inherent value of the institutional-quality construction and preeminent location of this complex adjacent to the downtown Stamford railroad station and I-95.

The third notable sale was of 225 High Ridge Road in Stamford, constructed in 1990 at a cost of $53 million. Designed by world-renowned architect David Childs, the 228,000-square-foot office campus is just north of the Stamford CBD and offers tenants a wide array of amenities, including almost half of its parking in a below-ground garage.

The distinctive property sold for $22,550,000 at an eye-catching price of barely $100 per rentable square foot despite being approximately 80 percent leased to a tenant roster boasting various national firms. Incredibly, this price was 70 percent less than the $76,250,000 price paid in 2005. Rarely, does one see such a value adjustment in a “trophy” asset. One would be hard-pressed not to characterize this sale as an unusually attractive acquisition.

2018 could still be a watershed year for the office market in Fairfield County. The much anticipated state elections with implications on tax policy and highway and rail infrastructure coupled with an increasing number of affordable and diversified housing alternatives contrasting with high rents and a declining transit system in New York City could make Fairfield County once again a real competitor in the regional office market.

John E. Sheehan is a principal of Delmhorst & Sheehan, Inc., which has offices in Stamford and Manhattan. The firm serves corporate, institutional and nonprofit clients in real estate acquisition, sales, leasing, strategic counseling, portfolio analysis, valuation and financing.He can be reached atjes@delmhorst-sheehan.com.