The Real Deal New York

Stamford hopes for commercial market surge

November 16, 2007
By J.W. Elphinstone

Long a beneficiary of suburban migration both commercial and residential, Stamford anticipates a robust market this year as two major financial institutions relocate and expand in Connecticut’s corporate headquarters city.

It will be a nice change for this lower Fairfield County city of 117,000. Stamford’s commercial real estate market closed out 2005 slightly worse off than the previous year, according to Cushman & Wakefield, which recorded 19.5 percent overall vacancy for the central business district and non-central business district, up from 17.2 percent the previous year.

Following several rough years that included an exodus of companies and slow leasing rates, the office market appeared headed for recovery in the first half of 2005, but then experienced weak third and fourth quarters. Market observers expect a reversal this year.

“Last quarter was a little slow (in leasing),” said Shaun Henderson, director of Benenson Capital Partners LLC, a building owner in the area. “But after the first of the year, literally in the last two weeks, we’ve seen activity pick up and we’ve had more people come in looking for space.”

Stamford has long been a magnet for companies heading north of New York, but competition from neighboring Greenwich and a slew of Westchester and Fairfield county locales have taken its toll.

Although Stamford boasts lower rents than Greenwich and Midtown Manhattan, the market has also lost tenants to central Fairfield County, especially Norwalk, a 10- minute drive east.

“It’s a game of musical chairs,” said Judd McArthur, vice president at brokerage CRESA Partners. “There’s been great leasing activity, but well over half of it is movement within the county. Some major companies are leaving Stamford, mainly because it’s cheaper to live in east or north Fairfield County, so companies are moving to be closer to their employee base.”

Stamford boasts around 16 million square feet of office space, roughly evenly divided between its central business district and non-central business district, according to CB Richard Ellis.

That’s nearly quadruple the amount of office space as Greenwich, which clocks in at around 4.4 million square feet. By comparison, Midtown Manhattan has 436 million square feet of office space and Lower Manhattan has 91 million.

Average office rents in Stamford’s central business district stood at $33.95 at the end of the third quarter, roughly equivalent to average rents in Manhattan’s Midtown South or Lower Manhattan. Greenwich’s posh central business district commands a much higher $65 a square foot on average, as does Midtown Manhattan, where rents stood at $53.94 a square foot during the same time period, according to CBRE.

One troubling statistic is that Stamford had roughly 3.4 million square feet of available space at the end of the third quarter, representing 44 percent of all available space in the entire Fairfield County in which it is located, according to CBRE.

But a recent upswing in leasing since the start of the year might help.

A real boost came last month when financial giant UBS announced that it was expanding into space left on the market by the financially troubled Purdue Pharma Ltd.

Hit hard by a patent loss, the drug maker laid off hundreds of workers last year and significantly decreased its space requirements at its 201 Tresser Boulevard, which spans nearly 550,000 square feet. UBS leased 255,000 square feet of the building and will initially occupy almost 78,000 square feet this spring.

UBS’ move follows another positive announcement. In September 2005, RBS Capital decided to relocate from Greenwich to Stamford and build a new facility up to 750,000 square feet on a vacant parcel. Though the loss for Greenwich is minimal because that market boasts tight fundamentals, the company’s arrival in Stamford is expected to be a shot in the arm.

“Two of the top banks that are large employers are committed to Stamford and will expand here,” said McArthur of CRESA Partners. “This reinforces Stamford’s new profile as a financial services location.”

Already, Jeff Newman, executive vice president at W & M Properties, has done a number of deals with financial services companies and law firms that are either relocating out of Manhattan or Greenwich or opening satellite offices.

While the rents at W & M Properties’ First Stamford Place and Metro Center are significantly lower than those of Midtown Manhattan and the Greenwich central business district, the quality of the buildings remains comparable, he said.

“Companies are seeing Stamford as an alternative or supplement to Manhattan and Greenwich,” Newman said.

Potential tenants from Greenwich and even White Plains have also been checking out Benenson Capital’s building at 1600 Summer Street. General Electric Capital had leased the entire building for a number of years, but recently announced that it would be moving to 777 Long Ridge Road.

Benenson plans to reposition the single-tenant building into a multi-tenant facility, adding such high-end amenities as a gym, a cafeacute; with Wi-Fi, a communal conference room, and a shuttle service to run to and from the train station.

“We’re anticipating renting out the whole building by the end of the year,” said company director Henderson.

Some of the departures that have plagued the Stamford office market in recent years include Diageo PLC moving its North America headquarters from Stamford to Norwalk two years ago, and Vertrue Inc. announcing plans last summer to relocate its headquarters to Norwalk. Fact- Set Research Systems also consolidated its Stamford and Greenwich offices into one facility in Norwalk.

But the tide may be reversing.

In January, Virgin Atlantic Airways announced its intention to relocate its U.S. headquarters from Norwalk to the Metro Center in Stamford’s South End, which is at the onset of a major revitalization.

Last year, Antares Investment Partners purchased 82 acres of waterfront property that once was the Pitney Bowes industrial site. Although the $2 billion redevelopment will yield mostly residential and retail, the project will help to meet the housing needs of corporate employees.

“There has been a steady migration of corporate users out of New York City to Stamford,” said Bruce MacLeod, Antares’ chief operating officer. “Greenwich and Westchester County are already well developed. So, the next logical place for the continuation of this trend is at the South End.”

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