Following several years of moribund activity, commercial office sales in Fairfield County look to be on the rise. Several notable deals have closed this year and brokers are viewing 2018 with optimism.
“You never want to be too bullish,” said Kevin Welsh, an executive managing director at Newmark Knight Frank in Stamford. “But I think that, for 2018, the office market is better positioned than it has been for a long time.”
The county”™s commercial office market has averaged about $300 million to $350 million in sales annually for the past five years ”“ with the exception of 2016, when Greenwich Office Park was sold to Fareri Associates for $130 million ”“ with 16 to 17 deals typically consummated each year.
According to Sean Cahill, principal and managing director of Avison Young”™s Fairfield/Westchester office, year-to-date office sales volume in dollars was only marginally lower in 2017 compared with 2016, while third-quarter sales this year were 27 percent higher than in the third quarter last year.
While trailing the national average, Fairfield County”™s current average office property sales price of $204 per square foot shows a strengthening over the past two to three years, Cahill noted. More than 20 properties of 20,000 square feet and up are for sale in Fairfield County, four of which are Class A buildings of 100,000 square feet and over, he said.
It’s a refreshing change from the general view of Connecticut as a market in decline that’s prevailed for the past several years. “In general,” Cahill said, “over the last four years there”™s been a ”˜not in Connecticut”™ label for institutional buyers.”
But that is showing signs of change, he said, pointing to a pair of deals closed in July that involved CBRE Global Investors. Stamford Towers, consisting of buildings at 680 Washington Blvd. and 750 Washington Blvd. in Stamford, was acquired by CBRE from S.L. Green Realty Corp. for roughly $97 million. The three-story Greenwich Atrium at 75 Holly Hill Lane in Greenwich was purchased by Benedict Realty Partners for about $25.6 million, with CBRE serving as the broker for seller S.L. Green.
“It shows that the smart money is starting to come back to the market,” Cahill said, “which should help improve its outlook in 2018.”
“We”™re definitely seeing more activity,” said CBRE”™s Jeffrey Dunne, vice chairman of capital markets and institutional properties.
“We still expect a couple of deals to close this quarter and new ones to be announced in the first quarter” next year, said Dunne, who characterized the firm”™s Fairfield County outlook as “cautiously optimistic.”
Not surprisingly, Stamford is viewed by brokers as the hub of commercial office sales activity.
“Stamford is definitely moving forward,” said Welsh. “It has a fantastic story right now, and we will continue to see that market improve.”
In addition to the aforementioned deals, Welsh pointed to the June sale of 225 High Ridge Road in Stamford by RA 225 High Ridge LLC ”“ represented by CBRE”™s Dunne, Steven Bardsley and Travis Langer ”“ to TNREF III High Ridge LLC, a joint venture between Darien”™s Baywater Properties and an investment fund managed by True North Management Group LLC of White Plains, for $22.5 million.
“That one goes into the ”˜value-add”™ bucket,” Welsh said, referring to a property that exhibits management or operational problems, requires physical improvement, and/or suffers from capital constraints.
Another value-add deal winning plaudits was the October acquisition of the 215,000-square-foot Lee Farm Corporate Park at 83 Wooster Heights Road in Danbury; it was purchased by CT Property Realty from Summit Development of Southport and The Grossman Cos. of Quincy, Massachusetts for $31.75 million. Summit spent over $1 million in renovations to the property, according to that firm”™s principal Felix Charney.
Although Stamford benefits from its location and the convenience of its train station, proximity to the latter is no longer a “must,” Welsh said. “It”™s the same trend you”™re seeing in retail, making something more experiential. If you can take a building and add the kinds of amenities that people are looking for now, not being close to transportation no longer means that ”˜it”™s done, forget it.”™”
That is due in large part to millennials, who increasingly are gravitating to the suburbs, where they can afford to buy a house and be able to work nearby, provided a city has the nightlife and attractions that are still important to them. “You”™re seeing the same kind of thing in Norwalk now,” Welsh said.
Topping Norwalk deals this year was the September acquisition of Cross Street Medical Center by Anchor Health Properties from Marcus Partners for $23 million. Tenants at the 71,401-square-foot building at 40 Cross St. include Norwalk Surgery Center/Norwalk Hospital, St. Vincent”™s MultiSpecialty Group, WestMed (formerly Norwalk Medical Group) and the Center for Advanced Pediatrics.
Norwalk”™s Glover Avenue has also seen a great deal of activity lately. With the exits of tenants Aon Hewitt and Xerox to Norwalk”™s 201 Merritt 7, Stamford developer Building and Land Technology found itself with 173,164 square feet of rentable space available at 45 Glover.
That property is being redeveloped to include a new café, conference center and health facility, as well as a more open-space approach to its office layouts, said BLT Chief Operating Officer Ted Ferrarone.
“We”™re looking to create a multiuse ecosystem that”™s comparable to (Stamford”™s) Harbor Point, a 24-hour live-work-play dynamic,” Ferrarone told the Business Journal in September.
Demand for mixed-use buildings continues to grow, said Christian Bangert, an executive vice president and partner at RHYS in Stamford. “Investors are looking to spread the risk,” he said. “If you have something that”™s retail and office or retail and residential, if one tenant moves out it doesn”™t necessarily mean you lose everything.”
Brokers are keeping an eye not only on trends in retail, where the days of big-box retailers like JC Penney and Sears appear to be numbered, but on geopolitical issues as well.
“You”™ve always got to watch the stock market and interest rates,” Bangert said. “Plus, we have Russia, North Korea, all this political stuff that could affect us, especially if something happens that causes a severe economic downturn.”
“But if there are no major global crises or financial changes,” Bangert said, “there”™s no reason that we can”™t see positive movement over the next four, five, six quarters.”
