Sublease market a sign of the recovery

To the driver passing through Fairfield County, there are no more visible billboards for the recession than the “space available” signs that dot commercial buildings.

If it is that individual”™s first return visit in a while, he or she might have noted a rise in the number of those signs bearing the letters “RHYS.”

A half-year after Cory Gubner launched RHYS Commercial Real Estate, the company continues to land commercial property listings throughout Fairfield County, and recently opened an office in White Plains, N.Y., to better crack the Westchester County market.

At the same time, Gubner”™s former company FirstService Williams is completing its transition to the Collier International brand, which has proven a powerhouse company in Northeast markets large and small, including New York City, Boston, and Hartford.

“It makes me think we should be going into the sign business,” said Gerard Hallock, who was hired to lead FirstService Williams after Gubner”™s departure, in reference to the daunting conversion of all of its signage to Collier International.

Both companies are to increase their signage posted at the entrances to Fairfield County”™s trophy office buildings that are largely the province of Cushman & Wakefield and CB Richard Ellis.

Brokerage companies agree that rents continue to hold steady between the fourth quarter of 2009 and the first quarter of 2010, a welcome development for tenants that absorbed huge increases in the most recent business cycle.

Businesses requiring less than 10,000 square feet were actively negotiating new leases, extensions, expansions, and renewals, RHYS noted, while larger office users seemingly have been more hesitant to commit to long-term leases, given uncertainty for the size of their work forces in the economic recovery that appears to be underway.

At the same time, RHYS reports that sublease rates fell relatively sharply in the first quarter, which could put pressure on what landlords can command for the space they lease directly

RHYS calculated that Fairfield County landlords put a net total of more than 750,000 square feet of additional office space into play in the first quarter ”“ sufficient for anywhere from 2,000 to 3,000 workers depending on needs. The availability of sublease space from business tenants, however, fell by 440,000 square feet on a net basis.

Real estate brokers have been waiting for such a tightening in the sublease market as a signal that the worst of the recession is past, and that companies are keeping space in reserve to accommodate renewed hiring.

In the case of the first-quarter drop in sublease availability, however, RHYS suggested it was largely due to some of those subleases expiring and landlords taking the space back to market it directly, rather than to any employer preparations for new workers.

What”™s more, the Fairfield County numbers are affected by the new availability of the former General Reinsurance Corp. headquarters at 695 East Main St. in Stamford, which has 570,000 square feet; and by Nestle Waters N.A. reaching a deal to sublease more than 160,000 square feet of office space at 900 Long Ridge Rd. in Stamford from Oracle Corp.

Even as Nestle Waters uncorked its Stamford deal, Greenwich also saw a significant deal during the quarter in Knight Capital Management reaching a sublease deal at 33 Benedict Place for more than 66,000 square feet of space. And at 2 Greenwich Plaza, Lone Pine Capital is leasing 38,000 square feet in an expansion there.

The 8.6 percent drop in sublease availability was nearly matched in Westchester County, whose business profile closely mirrors that of Fairfield County with a large number of professional services companies. In Westchester, by far the largest lease was Verizon Communications Inc.”™s renewal for 116,000 square feet in Valhalla; Avon Products Corp. took nearly 22,000 square feet of space in White Plains after speculation last year the company was considering Stamford as a potential office locale.

If the sublease market is one sign of the recovery, so is the space need for real estate brokerage companies themselves as client activity picks back up. For his part, Gubner plans to increase the size of RHYS as the commercial real estate market gains traction, with the company currently based at 84 West Park Place in Stamford. And as FirstService Williams readies to switch over its Stamford office nameplate to the Colliers name, the prospect is far better now than in recent history that a few empty desks await the new cadre of real estate brokers that will be needed.