Corporations are playing musical chairs as they shift properties around Fairfield County. Companies are moving from Manhattan to Greenwich or Stamford, from Greenwich to Stamford and from Stamford to Norwalk, resulting in higher absorption, lower vacancy and increased rents countywide.
Fairfield County absorbed over 260,000 square feet of office space year-to-date June 30, 90 percent of which occurred in Stamford, according to a report from CB Richard Ellis, a reversal from the negative absorption of 493,000 feet during the same period of 2005. Vacancy dropped by 1 percent to 13.1 percent from the second quarter of last year to the second quarter of this year. Average rent rose $1.87 to $28.91.
Stamford, the most popular city for office space in Fairfield County, continues its decade-long transition from a satellite of New York into more of an independent national draw for companies.
“We’ve done something like 12 deals in the past year that have come from either Midtown Manhattan, where rents are in some instances over $100 a foot, or the Greenwich central business district, where rents are in the upper $80s. We’ve seen growth in [Stamford’s] rent to upper $50s per foot in Metro Center and upper $40s a foot at First Stamford Place,” said Jeff Newman, senior vice president of W & M Properties, referring to properties surrounding the city’s transit hub.
Stamford’s transformation began in 1997, when UBS Warburg opened its United States headquarters there, dragging along several smaller businesses with it. This year, the Royal Bank of Scotland will add a 500,000-square-foot headquarters to the Stamford transportation center for itself and subsidiary RBS Greenwich Capital, adding 2,000 employees to the local workforce.
Four months ago, Bank of Ireland moved global financial service operations to Stamford, and it is rumored that Deutsche Bank may move there as well. Representatives of the bank said they could neither confirm nor deny this rumor.
“Stamford is now the banking capital of southern New England, if you will,” Newman said. “We’re seeing a lot of private equity funds, money managers, but also pretty healthy growth in other sectors: professional services, legal, health, education, marketing and information publishing.”
Stamford still has a 16 percent vacancy rate, however, keeping the market competitive. If another large business like Deutsche Bank moved in, attracting smaller businesses to make the move as well, the market would certainly fall sway in favor of landlords.
Newman noted that “there’s a demand for good product here in Stamford — Manhattan-style, trophy-style property. There’s a market for a tower building; I think that will happen by 2009, there will be some new product here.
“There’s a recognition out there that [companies are] going to have to pay for quality. While a rising tide may lift all boats, it makes it easier to differentiate the top product from Class B or properties where they haven’t reinvested or don’t have a great location. The [difference] between Class A and Class B will grow as well.”
While prices are rising for quality product, Newman warns that investment returns aren’t necessarily up as well for building owners. “Insurance costs are up; fuel costs are up; labor costs are up.” Overall, he doesn’t see very high returns on short-term investments in Stamford.
In Greenwich, building prices have reached Manhattan levels, such as the recent sale of Pickwick Plaza, a prestigious four-building property that sold for approximately $950 per square foot. While the Greenwich market remains strong, non-financial firms are making the exodus to Stamford or the even more budget-conscious move to Norwalk, where office and home prices are lower.
In the city of Fairfield, real estate is “hot,” according to Patricia Ritchie, the president and CEO of the Fairfield Chamber of Commerce. When she started five years ago, the Fairfield Department Store, a large influence in the city, had been demolished. It was replaced by a two-story retail center developed by Starwood Ceruzzi, an affiliate of the Starwood Capital Group.
“When you see a vacancy, it doesn’t last very long,” said Ritchie, speaking of the retail market.
The office market is getting a boost with the completion of a new train station in northeast Fairfield, which will include office buildings, parking, a new hotel, retail spaces, dining and more.
The new transit center may give Fairfield, which is zoned 90 percent residential, the ability to catch bigger and better fish for its office space pool.
Analysts and brokers all agree on the correlation between the Manhattan market and Fairfield County’s. The recent rise of Manhattan rents and unavailability of space have sent some New York firms packing.
“If New York is good, Stamford is good,” said Jack Condlin, president of the Stamford Chamber of Commerce. “The interesting thing is that if New York is experiencing some problems, Stamford will see a continued growth, and that’s from companies that decide to move out of New York. A 1 percent decrease in vacancy for them could be a 500,000-square-foot corporation for us.”