Fairfield County Q2 office market: Healthy demand, but vacancies persist
Fairfield County”™s office market was a mostly positive environment during the second quarter of the year. The leasing activity level reached 403,000 square feet while renewals covered 146,000 square feet, according to data from CBRE. That brings the midyear total to more than 1 million square feet, which is the strongest midyear activity in three years.
CBRE also determined that the region”™s overall availability remained flat on a quarter-over-quarter basis, sitting at 24 percent. One dramatic statistic involved the Greenwich central business district”™s (CBD) 9.6 percent availability level, which marked the first time in 10 years that the level fell into the single-digit realm.
According to a data report from RHYS, Fairfield County”™s overall vacancy rate decreased by 0.3 percentage points during the second quarter to finish at 15.6 percent. Of the region”™s five submarkets, Greenwich had the biggest quarterly decline with a 2.1 percent drop to a 14.5 percent vacancy rate. The Northern Submarket had the lowest vacancy rate at 6.1 percent, a slight increase from the first quarter.
RHYS also found that Fairfield County recorded a positive net absorption for the first time since the third quarter of 2016, at 162,428 square feet. Greenwich had the highest net absorption of the local submarkets at 109,155 square feet, which accounted for 67 percent of Fairfield County”™s total net absorption.
The Central Submarkets had its first positive absorption since the first quarter of 2016 at 28,159 square feet, while the Northern Submarket had the weakest performance in the second quarter with 25,844 square feet of negative net absorption.
As for the companies that are signing and renewing leases, data from Newmark Knight Frank (NKF) concluded that the combined finance and insurance industries were the dominant force during the first half of the year, accounting for 32 percent, or 476,000 square feet, of the region”™s office space. The TAMI industries (technology, advertising, media and information) accounted for 29 percent, with the technology sector making up 22 percent of that figure ”” albeit due primarily to FactSet”™s 173,164-square-foot lease signed in the first quarter at 45 Glover Ave. in Norwalk.
The professional and business services field covered 11 percent of space, followed by medical and health care-related tenants at 6.5 percent of overall activity and the legal services sector at 4 percent.
While the second quarter”™s data is mostly encouraging, it may not offer a complete picture of the market”™s vibrancy and viability.
“I feel the market is better than the statistics show,” said Cory R. Gubner, president and CEO at RHYS. “I am very bullish on this market. A lot of people are looking at space, companies are growing and expanding, and I am somewhat surprised that the statistics didn”™t show more.”
Among the top lease transactions during the first half of the year, two deals took place at 6 Research Drive in Shelton: Energizer Personal Care Products”™ 55,186-square-foot renewal and Survey Sampling International”™s 47,765-square-foot renewal. Tom Pajolek, executive vice president at CBRE”™s Stamford office, said he believed that the potential of Shelton is often overlooked in favor of the Greenwich and Stamford markets.
“Shelton offers a newer stock, and that market has grown over the last 20 years,” said Pajolek. “It”™s a suburban market that is more affordable and has a very good labor force that would have difficulty commuting to lower Fairfield County. It serves a very useful niche in the market.”
However, Tim Rorick, senior managing director at NFK, argued that the two major transactions at 6 Research were an anomaly. “The dominant landlord there is R.D. Scinto, and the property is probably 3 percent vacant,” he said. “A lot of the available space is Class B and C offices and flexible office space. There is not a heck of a lot of Class A space.”
Class A space is also an increasingly elusive commodity in the Greenwich submarket: RHYS reported the Greenwich vacancy rate dropped by 1.5 percentage points in the second quarter to 785,986 square feet. In comparison, Stamford”™s availability rate increased 0.1 percentage points to 5,627,142 square feet. One question that continues to be discussed is whether tenants focused on a Greenwich office space will be willing to set their sights on Stamford.
“The Downtown Stamford CBD represents a very good value in today”™s world,” said Pajolek. “Quite often, people who run financial services companies are looking for a location in Greenwich, but if they don”™t find it, Stamford is a very good alternative.”
Gubner added that Stamford”™s rents were also easier on a corporate budget. “A Class B building in Greenwich charges significantly more in rent than a Class A building in Stamford,” he said.
And Rorick noted that Stamford benefits from a shrinking alternative across the New York border. “In the past, some tenants had another option in downtown White Plains,” he said. “But the White Plains market is getting tighter by the minute ”” even tighter than Greenwich.”