Job growth, increased leasing activity and slowly improving rental rates are generating renewed interest in office asset investment in Fairfield County, according to CBRE, while the retail market, still struggling in the face of the growing e-commerce effect, is showing encouraging signs of life.
The July sales of the Vineyard Vines headquarters at 181 Harbor Drive in Stamford ($33.5 million) and of the Class A office complex at 8-10 Wright St. in Westport ($30 million), featuring all new curtain wall and common areas, reinforce the trend of well-maintained institutional assets attracting multiple investors, according to the firm. In both cases, pricing exceeded $350 per square foot.
High-weighted average lease terms (WALT) are also attracting buyers, as demonstrated by the Wright Street transaction, an off-market deal that CBRE said exceeded seller Marcus Partners”™ pricing expectations.
CBRE said it is seeing similar interest in 54 Wilton Road in Westport, with a 10-year WALT, and Grand Street Plaza at 150 Grand St. in White Plains, which has a seven-year average. The former property, marketed as Bankside at National Hall, is being redeveloped as a 26,200-square-foot, two-story Class A office building.
The Main & Main central business district location of Landmark Square, an approximately 800,000-square-foot, “value-add urban Stamford campus,” has attracted buyer attention from throughout the Eastern Seaboard, while the Vineyard Vines waterfront location within the Shippan Landing complex was named by Architectural Digest as the No. 9 “Breathtaking Office View” from around the world, CBRE noted.
“Successful execution of the sale of Fairfield properties is not only dependent on basic time-tested real estate fundamentals, but as importantly, being efficient at matching the appropriate buyer with the applicable real estate asset,” said Steve Bardsley, senior vice president. “Buyer identification is key. Not all buyers seeking deals with added value are value-add buyers.
“Thoroughly knowing the buyer pool reduces precious time dealing with buyers claiming to be in the value-add space. But, in reality, wanting high initial cap rates without compensating the seller for potential vacancy upside.”
CBRE Senior Vice President David Gavin commented on the negativity surrounding the county”™s retail market, particularly the continuing effect of the growth of e-commerce on brick-and-mortar.
“Much of this negativity is overblown, as store closures have largely centered around department stores and apparel tenants, most often found in malls, not open-air centers,” he said.
The general market trends cited by CBRE include:
Ӣ High-quality, infill centers remain in strong demand;
Ӣ Long-term, credit and cash-flowing centers have received strong investor interest;
Ӣ Buyers are seeking credit and term. The realtyӪs team has closed over $125 million year to date of single-tenant deals leased to such credit tenants as Home Depot, CVS, Stop & Shop and ShopRite; and
Ӣ The retail buyer pool, once dominated by REITs and institutional capital, is now largely private.
1031 capital ”” named after Section 1031 of the Internal Revenue Code, which allows investors to avoid paying capital gains taxes when they sell an investment property and reinvest the proceeds from the sale within certain time limits in a property or properties of like kind and equal or greater value ”” has also been prevalent, particularly among groups selling multifamily at low cap rates and exchanging into higher yield, but still stable cash flowing, retail centers.
Those trends are highlighted by a number of recent sales. High street and generational assets have been in high demand, according to CBRE, highlighted by a pair of recent sales in Greenwich: 200 Greenwich Ave. ($67 million) and 99 Greenwich Ave. ($30 million).
200 Greenwich is a mixed-use, 62,850-square-foot retail and office property anchored by Saks Fifth Avenue on the ground floor. In addition, real estate agency Compass recently leased the majority of the office space at the property. Nearby 99 Greenwich is leased for 19 years to CVS, a tenant at the property since 1992.
“While many institutional investors have followed the crowds toward multifamily and industrial offerings, attractive opportunities to purchase stable, generational, retail assets have been prevalent,” Gavin nesaid. “While years ago, the retail landscape was dominated by REITs and institutional investors, private/family office and 1031 buyers have helped fill the void, recognizing the stability and attractive yield of high-quality retail centers relative to other asset types.”
