Market hits speed bump

Office leasing activity across Fairfield County slumped in the first quarter, falling nearly 30 percent compared with a year ago, as the county”™s vacancy rate increased to 20.5 percent, a new report shows.

New leases reached in the first quarter of 2013 totaled 247,782 square feet as activity declined 61 percent from the previous quarter and 29 percent from the first quarter of 2012, according to CBRE Inc.”™s MarketView report.

The state of the commercial market was no more apparent than in Stamford”™s central business district (CBD). There, relocations, consolidations and closures by financial services firms including Citigroup, Diamondback Capital Management, Discover Financial Services and Aladdin Capital Holding Group contributed to 200,000 square feet of space that was returned to the market.

Countywide, nearly 450,000 square feet of space was vacated during the first quarter, according to CBRE. The vacancy rate, now at 20.5 percent, rose from 20.3 percent in the first quarter of 2012 and from 19.3 percent a year prior.

“A lot of the larger deals and a lot of the activity tend to take place in the second half of the year. So yes, usually the first quarter is a little quieter, but this was certainly a more quiet first quarter than we”™ve seen in the past,” said Colin Reilly, senior vice president with CBRE”™s Stamford office.

Reilly acknowledged the significance of the county”™s financial services industry to the local office market.

“By all means, the lower Fairfield County market has been and will continue to be driven by financial services,” he said, adding that “some of the regulatory issues need to be resolved” before firms look to add employees and expand offices.

Only three of the six Fairfield County sub-markets measured by CBRE”™s MarketView report showed increases in leasing activity compared with the first quarter of 2012.

Greenwich saw leasing activity increase by about 20,000 square feet compared with a year ago, while the northern and central portions of the county each saw an incremental increase.

The eastern region of the county saw a significant dropoff in activity, as did the Stamford CBD and portions of Stamford not included in the CBD.

While the numbers may not bode well, Reilly said there is a sense of optimism that the market is nearing a turnaround.

“Even though the quarter didn”™t look so great, there seems to be a level of optimism that … we hope will translate into numbers more in line with historical averages,” he said.

Only two first-quarter leases topped 20,000 square feet, and there were no 50,000-square-foot deals. The largest transactions included a 31,644-square-foot lease by EDR in Shelton and a 20,262-square-foot lease by Direct Media in Greenwich.

Two-thirds of all new lease transactions were for less than 10,000 square feet, which Reilly characterized as typical for the market.

Among lease renewals, which did not factor into the latter figure, Boehringer Ingelheim USA Corp. renewed its 327,396-square-foot lease at the Matrix Corporate Center in Danbury for 10 years.

“It”™s the composition of the marketplace ”” we”™re dominated by smaller enterprises,” Reilly said. “So that tends to be the norm … What we”™ve seen from the past couple of years is more renewals by the larger enterprises than new leases or expansions, generally speaking.”

The average asking rent countywide was little changed at $35.36 per square foot, down slightly from $35.60 per square foot in the first quarter of 2012.