It”™s hardly news to say that, even with the pandemic, Stamford”™s real estate market is continuing to boom.
But while its residential sector continues to explode ”” Stamford”™s apartment occupancy rate is “off the charts” at about 97%, the city”™s Director of Economic Development Thomas Madden recently said ”“ its office sector is a little less sturdy.
“The residential market is on fire,” affirmed Colliers International Group Senior Managing Director Bob Miller. “Unfortunately, the commercial market tends to lag, in a good economy, by six, nine, even 12 months.”
Colliers”™ latest commercial market snapshot for Fairfield County finds its availability rate creeping up, from 24% in the fourth quarter of 2019 to 25.3% in the third quarter of 2020 to 25.4% in the fourth quarter of last year.
The numbers are, perhaps surprisingly, even more ominous for Stamford. Availability in the city”™s central business district (CBD) has gone from 25.4% in Q4 of 2019 to 29.5% in Q3 2020 to 30.6% in Q4 2020. Its noncentral business district has more or less kept pace, rising from 29.5% in Q4 2019 to 32% in Q3 2020 before dropping back to 30.3% in Q4 2020.
The CBD”™s 25.4% availability is the highest on record, according to Miller ”” and would have been even higher if not for Nuvance Health, whose 220,000-square-foot lease at The Summit at Danbury, inked on Dec. 20, was the state”™s largest office deal of 2020.
“The same thing happened in 2019 with the WWE,” said Colliers Associate Tim Johnson, referring to that firm”™s signing a 16½-year lease for the 415,000-square-foot, three-building complex at 677 Washington Blvd. “You take that out and take Nuvance out of last year and the picture looks a lot less rosy.”
Even without doing that math, 2020”™s total leasing activity in Q4 2020 was 711,780 square feet ”” compared with 861,984 square feet in Q4 2019. Stamford”™s CBD fell from 314,634 to 191,972 square feet, and its NCBD from 110,304 feet to 24,758 square feet, over that same period.
“It”™s no secret that 2020 was a horrible year for a lot of people,” Miller said. “The economic impact was really severe. And that”™s where the 800-pound gorilla in the room comes in.”
The gorilla, of course, is Covid-19. Despite optimism that vaccination numbers will continue to go up, businesses are still trying to figure out what the future looks like, pandemic or no pandemic.
“It”™s not a question of ”˜if”™ but ”˜when”™” the pandemic is behind us, Johnson said. “A lot of companies are looking at what they know and what they don”™t know, and trying to be light on their feet and keep their balance sheet healthy.”
“Not until companies and their employees start to come back will we get a good sense” of what the post-Covid world might look like, Miller added. “How many people are going to be working from home every day, how many are going to be flexible and how many are going to be in the office every day is still up in the air.”
He cited a Fortune survey last fall that found 76% of 171 CEOs saying their company would need less office space in the future. A February Fortune survey revealed that only 4% of CEOs plan to add office space.
While some smaller companies have or are in the process of making such decisions, Johnson said, “A lot of larger employers haven”™t gotten there yet.”
Combined with the outsized, distorting effect of the Nuvance and WWE deals, “We need a lot of 5,000 and 10,000-square-foot deals coming in” to get the office sector back on track, Johnson said.
Miller ”” who earlier mused that “it feels like the ninth inning,” with Covid vaccines on the rise ”” likened the situation to the two New York baseball teams”™ approach to winning games. “I”™m a Yankees fan, so I love the grand slam home run,” he said. “But with the Mets, you get a lot of singles and walks.” Which strategy is better depends on the situation, he said.
Nevertheless, Miller said, there are some “green shoots” in evidence in Stamford. Colliers has been appointed exclusive leasing agent for two Class-A office towers in downtown Stamford. The properties ”” 300 Atlantic St. and 177 Broad St. are an integral part of RFR Realty”™s Stamford portfolio. Miller, Jonson and Colliers President Ted Koltis are handling the nearly 500,000-square-foot assignment.
300 Atlantic is a 295,000-square-foot property near the Stamford train station and near I-95, while 177 Broad is a 200,000 square-foot office building near the Stamford Town Center and the city”™s bustling arts and entertainment area.
For all the uncertainty over the future of its commercial real estate sector, Miller said, “Stamford has been a real mecca for high-end businesses in the region and in the state, for some time. And once businesses start looking more closely at what we have to offer, we think we”™ll see more growth here.”
