If you are seeing more work vans pulling into corporate offices than moving vans these days, there may be a reason.
As commercial leases come due this summer and fall, employers who until recently anticipated moving into larger quarters may be second guessing those plans against a backdrop of uncertain hiring plans and rents that appear to be stabilizing after years of increases.
After direct leasing rates in Fairfield County leaped 10 percent in 2007, or $3 per square foot, in the first quarter the average commercial rent increased just 35 cents, according to statistics provided by Cushman & Wakefield Inc.
There is anecdotal evidence that the money that might have gone to the moving company is being spent on interior renovations. In the second half of March, property owners initiated more than $7 million in alterations in commercial buildings throughout Fairfield County to accommodate the needs of tenants, up from $1.6 million in the first half of the month, according to commercial deed filings tracked by the Fairfield County Business Journal.
Far from a scientific measure of activity, nevertheless the increase could indicate an increased willingness by employers to make do with their existing quarters as lease dates appear on the horizon, rather than attempting to move while real estate markets and staffing projections are in a state of flux.
That would be a change from recent history, in which companies demonstrated a trend of moving eastward to escape higher rents in New York City, Greenwich, or Stamford; and shorten commutes for employees who live east of those business centers.
Companies continue to “trade up” for office space ”“ last month, Hilb, Rogal & Hobbs Co. moved its office from Stamford, where its lease was about to conclude, to Merritt 7 Corporate Park in Norwalk.
In the past year, however, Merritt 7 has undertaken large renovations to accommodate its existing tenants”™ space needs, according to Keith Crosby, who heads the construction services component of Arthur D. Phelps Inc. Recent ADP projects include an expansion for the headquarters suites of FactSet Research Systems Inc., which consults on financial analysis for investment companies and banks.
Of course, the turmoil in the credit markets is impacting companies interested in moves outside their immediate area code. Nationwide, 34,000 people lost jobs in 2006 due to the position being relocated outside commuting distance, according to the U.S. Department of Labor, up 2 percent from 2005.
That number could drop ”“ the depressed residential real estate market is having a significant impact on how companies handle relocation benefits for employees who must sell their homes, according to John Sculley, vice president and managing director of Norwalk-based RIS Consulting Group, which advises companies on relocation strategies.
“For our clientele which is more nationwide, there are growing concerns about people”™s reluctance to relocate and even inability to relocate given (the housing market),” Sculley said. “Certainly for a company that wanted to relocate an operation intact to another market, this would be a difficult market and even an expensive market to do so.”
For companies attempting an out of market relocation, some of the strategies companies are employing include limiting a home”™s listed price to 5 percent above its appraised value, and offering employees a 2 percent “bonus” on the price of a sale, if a home is sold within 90 days.
