NORTHEAST SNAPSHOT, MAY 2006
Fairfield County, Connecticut Office Market
Throughout southwestern Connecticut, business has started to pick up as companies begin to feel more confidence in the direction of the economic recovery. Expansion of local companies is once again a motivating factor in the market’s performance, and relocations into the area are slowly increasing as rents in Midtown Manhattan, New York City, continue to escalate and space becomes scarce — both of which are good signs for potential development. While traditional office buildings and transit-oriented complexes are the most popular proposed structures, many developers are now looking “outside the box” and becoming more creative by redeveloping existing properties. Others are favoring mixed-use developments that offer live/work opportunities in conjunction with hotel and retail uses. And still others look to fill holes in services in certain areas by building medical or flex properties that accommodate non-traditional tenants.
Class A rental rates vary from $18.50 per square foot in Trumbull, Connecticut, to $62.75 per square foot in the Greenwich, Connecticut, central business district. In the most prestigious trophy buildings, however, tenants will pay for the privilege of a certain address, and asking rents reflect that exclusivity. Available space in those properties can total as much as $90 per square foot, with taking rents around the same amount.
As of the end of the first quarter, availability rates ranged from just over 3 percent in very highly desirable markets like the Greenwich CBD to almost 26 percent in areas with less activity. For Fairfield County as a whole, availability hovers around 15 percent.
As southwestern Connecticut becomes more congested and a more expensive place to live, a large portion of the area’s labor force has moved further east to more affordable areas. To access these workers, many companies have made strategic — and often economically savvy — decisions to relocate their businesses to these same eastern communities, where the cost of doing business parallels the affordability of living. Therefore, development has focused around these areas as the demand for space has increased while costs remain low. Shelton and Norwalk have seen particularly intense new construction as developers like Robert Scinto and Building and Land Technology look to satisfy tenant requirements.
While proposals for new buildings exist all over southwestern Connecticut, the city of Norwalk has seen the majority of the actual development over the past few years. Some of the most significant projects are the Towers at Merritt River development, which now totals three buildings on Main Avenue, and its neighbor the Merritt 7 office complex. The quality and affordability of these brand new buildings have attracted prestigious tenants such as Diageo PLC, FactSet Research Systems, Hewitt Associates and GE Commercial Finance, pushing the growing tenant movement east and creating another center of business in Fairfield County. More development also is planned for Norwalk along Main Street in SoNo, where 95/7 Ventures envisions a mixed-use complex with a major office component that will mesh with the existing charm of the area while offering the best space and technology for today’s office tenants.
Shelton, Connecticut, also has seen a significant amount of development, due primarily to the efforts of Robert Scinto; recently, he proposed construction of yet another office building adjacent to 4 Research Drive. Dekzon LLC and Cuminotto Inc. are also marketing a 100,000-square-foot, medically focused complex to be known as Ivy Brook Medical Center on Ivy Brook Road in Shelton. Two buildings will be built in that location to accommodate the medical needs of the local community, filling a hole in the primarily office commercial area.
Interestingly, the city of Stamford, Connecticut, also has begun to see some development activity from visionaries looking to redevelop older sites, particularly those with existing infrastructure or near the train station. For example, Antares Real Estate’s mixed-use plan for several parcels in the city’s South End essentially will redefine an industrial area for more general use. In the same area, W&M Properties’ long-planned Metro Center II may finally be brought to fruition, and Odyssey Ventures has already begun renovating an old typewriter factory into an office building that will eventually house the headquarters of Virgin Atlantic Airways. And finally, in another example of Stamford’s ongoing attractiveness to financial service firms, RBS Greenwich Capital will move its North American headquarters to a new building to be built across the street from UBS’s headquarters on Washington Boulevard.
In the first quarter of this year, several major leases have been signed in Fairfield County, signaling the increasing health of the market. Boehringer Ingelheim signed on for 98,000 square feet at 39 Old Ridgebury Road in Danbury, Connecticut; Royal Bank of Scotland leased 86,000 square feet at 695 East Main Street in Stamford; and Light Camera Interaction took 50,600 square feet at 141 Danbury Road in Wilton, Connecticut. In the last quarter of 2005, UBS signed a 280,000-square-foot lease for expansion space at 1 Stamford Forum in Stamford, while Bic Corporation leased 72,950 square feet at 1 Research Drive in Shelton.
In the future, Stamford most likely will see further activity, as the continuing growth of UBS and the recent commitment by RBS Greenwich Capital to a new headquarters in the city could spur activity from other financial service firms as well as companies that provide service to them. In Norwalk, the proposed 95/7 Ventures development in SoNo could extend the success seen in the Merritt 7 corridor all the way to Interstate 95.
— Robert Caruso is managing director for CB Richard Ellis in Stamford, Connecticut.
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