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Reports by Jones Lang LaSalle, a Chicago-based real estate services firm, have found the Fairfield County class A office market recorded significant increases in vacancy rates in nearly every submarket in the final quarter of 2008.
“As companies continue to downsize in response to turbulent economic conditions, we are seeing a significant amount of sublease space enter the Fairfield County office market,” said Jeffrey Gage, executive managing director of brokerage with Jones Lang LaSalle”™s Stamford office.
The neighboring Westchester County, N.Y., office market held it”™s stability at year-end 2008 with little movement in either direction.
Fairfield posted an increase in its overall class A vacancy rate this quarter, rising to 15 percent at year-end 2008 from 13.3 percent in the third quarter of 2008.
The county”™s class B space also saw overall vacancy rates rising to 22.8 percent from 22.2 percent during the same time period.
“Some of this space presents a challenge for brokers as the time remaining on the lease term may be too short for many space users,” said Gage. “With the addition of this competitively priced product to the market, landlords are competing aggressively for a short list of tenants still in the market for space.”
According to Jones Lang LaSalle, central Fairfield County was the only area where overall office vacancy rates fell this quarter, assisted by a decrease in the class B vacancy rate that was fuelled by Velocity Sports & Entertainment signing a direct lease for 32,652 square feet at 230 East Ave. in Norwalk. As a result, Central Fairfield County’s class B vacancy rate fell to 35 percent at year-end 2008 from 35.9 percent in the third quarter of 2008. The reports showed the submarket”™s class A buildings posted an increase in vacancy rates, rising to 11.5 percent from 11.3 percent during the same time period
Gage said overall average asking rents for Fairfield County office space decreased slightly in the final quarter of the year, with a minor drop in class A rents offset by a small boost in class B rates. The county”™s class A office buildings saw rents fall 28 cents between the third and last quarter to $38.96 per square foot at year-end 2008. Rates for class B product in Fairfield County rose 17 cents to $29.34 per square foot.
Jones Lang LaSalle (JLL) found Stamford”™s class A office vacancy rate rose in the final quarter of the year. The city”™s high-quality office buildings saw vacancy rates expand to 18.4 percent in the fourth quarter of 2008 from 16.5 percent the previous quarter.
Office rents in Stamford decreased in all building classes at year-end 2008, JLL reported.
Gage said Greenwich, with its heavy concentration of hedge funds and other financial services firms, posted large increases in vacancy rates in all office building classes and, consequently, the biggest decrease in average asking rental rates in all office building classes.
Westchester County posted an overall decrease in office vacancy rates at year-end 2008, driven by falling or unchanged class A vacancy rates throughout the county.
According to Edward Tonnessen, executive managing director of brokerage with JLL”™s Stamford office, Westchester County is not a volatile office market and rarely sees major fluctuations in vacancy or pricing for a couple of reasons.
“The county”™s close proximity to Manhattan ensures a steady trickle of activity from space users,” said Tonnessen. And, “The average tenant size is smaller so any one gain or loss does not impact the vacancy rate very much.”
The JLL data found Westchester County building owners eked out an increase in overall average asking rents of just a few cents this quarter.
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