‘Higher quality assets’ in demand as CT Southwest office market holds firm
It’s long been clear now that the COVID-19 pandemic has permanently altered the way white-collar workers work, but what that means for the office market is still unclear.
The popularity of hybrid workplaces — an important role for in-person collaboration — is reflected in the steady performance in recent months of the southwestern Connecticut office rental market. Although demand for corporate office space is not explosive, Fairfield County continues to secure significant deals.
One difference: tenants are more demanding than ever, according to a new report from commercial real estate brokerage JLL.
“The demand is really for higher quality assets, and there is less demand for second tier assets,” Betsy Buckley, senior vice president of Stamford-based JLL, said in an interview. “If you want your employees back, your office space has to be amazing. If you are trying to attract New York tenants, you must have the equivalent of a New York building.
For the first quarter, Fairfield County recorded about 750,000 square feet of leases, compared to about 514,000 square feet in the fourth quarter of 2021, according to JLL.
The increase is attributable to the largest transaction of the first quarter, which did not fill any vacant office space.
Shipping and courier company Pitney Bowes has completed a sale-leaseback of its operations center at 27 Waterview Drive in Shelton. The company sold the approximately 310,000 square foot property for approximately $50 million. But it remains there by leasing 100% of the site, with around 630 employees based there.
“In 2021, we determined that the terms were favorable for a sale-leaseback of our Shelton property and we went to the market to negotiate with several potential buyers,” Pitney Bowes, headquartered in Stamford, said in a statement. written statement. “BDP Holdings of New Jersey was the winning bidder, and we are delighted to have them as landlord for our long-term lease.”
Boosted by the continued presence of large corporations such as Pitney Bowes, Fairfield County’s office availability rate has not fluctuated greatly during the pandemic. In the first quarter, the county’s total vacancy rate was 23.7%, compared to 24.2% in the fourth quarter of 2021 and 25.6% in the first quarter of 2021.
Among Southwest Connecticut’s submarkets, the vacancy rate was lowest in the central business district of Greenwich, at 6.1%. Leading deals in the Greenwich CBD, Silver Point Capital has signed a 32,000 square foot renewal and expansion at 2 Greenwich Plaza. In another sign of the strength of downtown Greenwich, alternative investment firm Apollo Global Management announced last month that it buy the office complex at 100 W. Putnam Ave., for more than $200 million. Last year, Apollo leased approximately 43,000 square feet at 100 W. Putnam.
Central Fairfield County, which includes the Darien-Norwalk-Westport corridor, and Stamford had the highest vacancy rates in the county – at 31.1% and 29.7%, respectively. Stamford’s high vacancy rate has persisted since the 2008 financial crisis and belies the arrival of many businesses to the town in recent years.
Newcomers to Stamford include tobacco giant Philip Morris International, cryptocurrency and blockchain-focused conglomerate Digital Currency Group, real estate-focused fintech company Tomo Networks and manufacturer and technology service provider ITT.
Another sign of confidence in the Stamford office market, the office building at 400 Atlantic St., the former headquarters of branded service provider Spectrum Charter Communications, sold earlier this month for 72 millions of dollars. George Comfort & Sons and AVG Partners, the property’s apparent buyers, also own the neighboring office complex at 677 Washington Blvd., where PMI plans to open its new headquarters later this year.
North Fairfield County, which includes Danbury and nearby towns, posted a vacancy rate of 14.9%. Eastern Fairfield County, which includes Bridgeport and surrounding towns, recorded a rate of 13.7%.
As evidenced by relatively stable vacancy rates, no major company in the past two years appears to have permanently closed its headquarters in southwestern Connecticut. But JLL officials said some companies have reassessed their office footprints amid the proliferation of remote working.
“The reason behind the fixed availability rate is that there are so many good things happening with tenants who move here,” Buckley said. “Tenants, on the other hand, are still figuring out what they need. Some of them are shrinking (their office space), and some of them are growing… But we don’t see any kind of exodus out of Fairfield County.
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