CBRE casts weather eye on commercial real estate recovery

After a positive first quarter, five executives from CBRE, plus the company”™s director of research, offered a healthy take on a commercial market battered by recession and, lately, finding fresh pulses. The focus was Fairfield, but neighboring Westchester County, N.Y., was also part of the uptick and the conversation.

Fairfield County”™s overall leasing activity of 612,176 square feet in the first quarter was nearly three times the level of the 247,782 square feet leased in the first quarter of 2013, CBRE reported. CBRE also found overall leasing performance in Fairfield County in the first quarter was 25 percent above the five-year first quarter average of 489,617 square feet.

The Stamford central business district and the Stamford noncentral business districts together accounted for 62 percent of leasing activity for the first quarter in the county.

“Just in the last six weeks alone I”™ve become bullish,” said Robert Caruso, CBRE”™s managing director.

CBRE staff members who participated in the company”™s first-quarter review included, from left, Tom Pajolek, Johanna Clark, Khadija Licata, Robert Caruso, Brian Carcaterra, Jeff Gage and Paul Jacobs.

Caruso met with the press recently at CBRE”™s 201 Tresser Blvd. headquarters in Stamford along with Khadija Licata, CBRE”™s director of research services; Tom Pajolek and Paul Jacobs, executive vice presidents; and Brian Carcaterra and Jeff Gage, senior vice presidents. Executive Vice President William Cuddy and Johanna Clark, the company marketing and communication director, also attended.

The 416 commercial buildings in Fairfield County contain 43 million square feet and are asking now, on average, $36.41 per square foot. Rents countywide have risen about $1 per square foot in the last year after a tepid 2011-2013 run that saw prices barely move. Fairfield has six submarkets, with the costliest near Greenwich, where rents can exceed $60 per square foot. The average deal was for 8,162 square feet.

Multifamily units, too, are popular, with multiple thousands under construction, notably in Stamford and Norwalk.

Westchester commercial prices are in “the $20-$30-per-square-foot” range and remain more homogenous throughout the county than in Fairfield County. Westchester has 28 million square feet in 220 commercial buildings.

In Westchester, overall leasing activity was up 28 percent from the first quarter of 2013 to 410,216 square feet. Overall performance was 51.28 percent above the last five years”™ first quarter average of 271,162 square feet. The White Plains central business district witnessed 50,000 square feet of positive absorption.

Nationally, the word is of youths flocking only to big cities. The more nuanced take from the CBRE sitdown was of youths seeking urban amenities and of finding and embracing them in smaller cities like Stamford and Norwalk. That”™s a change from five years ago, the assembled agreed, when those same youths wanted only Manhattan and Brooklyn. Stamford”™s central business district witnessed a positive absorption of 220,000 square feet.

The four biggest in-county first-quarter leases as reported by CBRE were all in Stamford. In descending order they were: 117, 700 square feet for Deloitte L.L.P. at 695 Main St.; Pitney Bowes”™ 74,191 square feet at 3001 Summer St.; Genworth”™s 44,597 square feet at 3001 Summer St.; and Charter Communications”™ 36,782 square feet at 400 Atlantic St. Deloitte and Charter leased in the central business district while Pitney Bowes and Genworth chose noncentral.

The fifth-biggest lease was in Norwalk: 23,682 square feet at 761 Main Ave. for the Connecticut Department of Children and Families.

The CBRE executives cited a growing trend known as densification that sees offices packing more employees into the same square footage close to mass transit while providing fewer parking spaces. “Instead of three bodies per 1,000 square feet, the movement is toward five, six, seven and eight per 1,000 square feet,” said Caruso.

Carcaterra noted the CBRE Los Angeles office has already densified, resulting in space savings of one-third. The practice is also known as hoteling. “Now, the Los Angeles office has become a showcase for how to do this,” he said. The office there hosts three to four meetings on the topic per week.

One quick car solution, offered by Pajolek, was the institution of concierge parking. “People love it,” he said, citing convenience and flexibility that tenants are embracing in lieu of large parking lots.

Exceptions, however, are the region”™s biotech facilities, as evidenced by Tarrytown, N.Y.-based Regeneron, the biggest biotech company in New York, employing 1,500 locally and currently adding 300,000 square feet to its Tarrytown campus. WestMed in Rye, N.Y., (with multiple Westchester sites) and New York Medical College in Valhalla, N.Y., likewise maintain large campuses.

Commercial development, in general, is finding traction in three arenas: near transit hubs of the sort planned in Stamford and White Plains, N.Y.; those with commodious medical campuses that can accommodate both expansion and many cars; and those willing to upgrade and add amenities, as has happened with Merritt 7 in Norwalk, where multimillion-dollar upgrades have produced a market capable of supporting three Starbucks coffee shops.

CBRE represents 38 percent of all tenants in the regional 50,000-square-foot-plus commercial market, the largest share.

“It has surely been a protracted recovery,” Caruso said. “Is it the fed? Is it this? Is it that? It is what it is. The market has adapted.”