The CT office market is recovering from the pandemic, but challenges remain

Two full years have passed since the COVID-19 pandemic spread through the state and inflicted economic disruption whose effects included plummeting office occupancy rates.

Today, the outlook for the office market in southwestern Connecticut is more encouraging. While corporate tenants are still generally taking up less of their office space on a day-to-day basis than before the pandemic due to the rise of remote working, companies are still signing new leases and vacancy rates in the area have not exploded.

But market forecasts are not cloudless. While the town centers of Stamford and Greenwich enjoy a steady stream of new arrivals, the central section of Fairfield County is still struggling with high vacancy rates which have been exacerbated by the recent emergence of large space blocks.

“The Fairfield (county) office market continues to face a sharp bifurcation in demand seen in the main submarkets of Greenwich and Stamford, compared to the office areas further north and east of the county” , said officials of the commercial real estate company JLL. in a report on office leasing in Fairfield County in the second quarter of this year.

Large vacancies in some parts, low availability in others

The second quarter highlighted the long-standing challenges facing the Fairfield County Center. It again posted the highest vacancy rate in the county, at 32.4%. This total included a vacancy rate of 40.7% in the Highway 7 corridor which encompasses Norwalk and Danbury.

To compound the dire situation in central Fairfield County, battery maker Duracell has put about 142,000 square feet on the market in the roughly 311,000 square foot building it owns at 14 Research Drive in Bethel, officials say. of JLL and another commercial real estate company, CBRE. The latter sells the available space.

But the newly available space doesn’t appear to reflect a downsizing of Duracell’s headquarters there. A CBRE spokesperson said in an email that “available space was leased to Nuvance (Health) until their recent move to Summit” in Danbury.

A message left this week for Duracell was not returned.

At the same time, Frontier Communications is “seeking to reduce its workforce by subletting an entire 42,525 square foot floor,” in its headquarters at 401 Merritt 7 in Norwalk, according to the JLL report. The sublease plan came into being only about a year after the A Fortune 500 company emerged from bankruptcy and extended its stay at 401 Merritt 7 by signing a new lease for approximately 48,000 square feet.

In response to an investigation by Hearst Connecticut Media, Frontier officials did not deny JLL’s report that the company planned to sublet most of its headquarters.

“Our real estate decisions are informed by the needs of our employees,” the company said in a statement. “Since the pandemic, we have implemented a new hybrid working model, with offices designed primarily for collaboration and meetings. We have dedicated space for teammates who want or need to come into the office for work and we will continue to rent and occupy space at Merritt 7 to support our workforce.

In contrast, there are few openings in parts of southwestern Connecticut. During the last quarter, Greenwich recorded the lowest vacancy rate, 12.6%, among towns and cities in Fairfield County. Space was particularly tight in the central business district of Greenwich, which had a vacancy rate of just 5.1%.

Overall, Fairfield County vacancy levels haven’t fluctuated much during the pandemic. In the second quarter, the county’s vacancy rate was 25.4%, compared to 25.9% in the second quarter of 2021. Since the start of the pandemic, the county’s vacancy rate peaked at 26%, this which was the fourth quarter level. of 2020.

Stamford and Greenwich dominate rental business

In the second quarter, Fairfield County saw more than 300,000 square feet of rental activity, up about 10% from the same period last year, according to JLL.

In the biggest new lease announced in the last quarter, fast-food giant Subway said late last month it would move its headquarters from Milford to Shelton. It plans to take about 90,000 square feet in Enterprise Corporate Park.

But southwestern Connecticut rental activity in recent months has been centered in Stamford and Greenwich. The central business districts of these two municipalities are particularly popular due to their proximity to Metro-North Railroad stations, Interstate 95 and the Merritt Parkway, as well as numerous restaurants and shops.

Among other new leases completed in the past quarter, JLL noted in its report that financial services firm Stifel Nicolaus & Co., subleased 24,500 square feet at 677 Washington Blvd. in downtown Stamford. , which was previously held by Thomson Reuters.

The turnaround of 677 Washington – which a few years ago languished as the largest vacant office building in Stamford – has also seen it attract a number of other new tenants. Tobacco giant Philip Morris International and WWE sports entertainment powerhouse both plan to open new headquarters there later this year.

One block south of 677 Washington is the site of the state’s largest corporate relocation to be completed since the pandemic began. Spectrum service provider Charter Communications has opened a two-building headquarters
covering over 900,000 square feet at 400 Washington, adjacent to the downtown Stamford Metro-North Railroad station.

In Greenwich, newcomers include alternative asset manager Apollo Global Management, which confirmed earlier this year that it purchase for about 200 million dollars the approximately 155,000 square foot property at 100 W. Putnam Ave. The acquisition follows Apollo signing last year of a lease for approximately 43,000 square feet at 100 W. Putnam.

Generally, companies are offering white-collar workers more flexibility in their working hours and locations than before the pandemic. For example, Synchrony, the nation’s largest private label and private label credit card provider, announced in October 2020 a policy allowing employees to work permanently from home. But its headquarters at 777 Long Ridge Road in Stamford has reopened for those who want to work in person with colleagues.

[email protected]; twitter: @paulschott

Jose C. Birney