NORTHEAST SNAPSHOT, SEPTEMBER 2011
CONNECTICUT OFFICE MARKET
Like most office markets around the nation, the Connecticut office market is going through a period of “normalization.”
According to Tim Rorick, senior managing director of Colliers International CT LLC in Stamford, Connecticut, there has been a consistent level of demand for office space, with some signs pointing to positive net absorption. However, he notes, much of the activity in the market has been “tire kickers” looking for aggressive deals or tenants using the soft market to leverage a favorable renewal or relocation. Northeast Real Estate Business recently asked Rorick for an update on the market.
NREB: How has the Connecticut office market changed in the last year?
Rorick: In the past year or so, the Connecticut office market has stabilized, but we still see landlords who are aggressively presenting deals to tenants. We also are seeing tenants using a very soft market to their advantage by recasting and extending their leases well before maturity. Although we feel that the market has bottomed out, there still are some great opportunities for tenants, and this opportunity has generated a perceptible uptick in leasing activity. The end result is that many tenants have been able to get into higher quality buildings without paying higher rents.
NREB: What are current vacancy rates? How does this compare to last year?
Rorick: In Fairfield County, the vacancy rate at the end of second quarter of 2011 was 13.4 percent. At the end of second quarter 2010, the vacancy rate was 13.2 percent. As these numbers demonstrate, vacancy has only slightly increased. However, the amount of space being actively marketed has declined over the last year from 22.3 percent to 21.8 percent.
NREB: What are the current rental rates? How are they trending?
Rorick: Rents have remained steady between $29 and $30 per square foot:
NREB: Have any significant office sales recently closed in your market? Are there any deals in the works or properties on the market that you believe will have a major impact?
Rorick: Several buildings that have sold in Fairfield County were either distressed or were on the verge of becoming distressed assets. These include 750 East Main Street in Stamford, 1 Dock Street in Stamford, 889 Bridgeport Avenue in Shelton, 19 Old Kings Highway South in Darien, and 450 Post Road East in Westport.
The only property in our market that will still have a major impact on the investment sales market is the Financial Center at 695 East Main Street in Stamford. The property consists of approximately 590,000 square feet and is 100 percent vacant. The ownership recently hired a broker to market the property for sale.
NREB: Are there any significant office projects under development?
Rorick: Building & Land Technology is developing Harbor Point in Stamford. The project will feature more than 1 million square feet of commercial space including Class A offices, hotels, retailers, restaurants, and a full-service marina, as well as 4,000 new residences. Tenants include Design Within Reach (corporate headquarters and a retail store), Fairway Market, Louis Dreyfus, Robeks, and First Niagara Bank.
NREB: Please name any companies new to the market & where they are located.
Rorick: Starwood Hotels and Resorts’ corporate headquarters just relocated from Westchester County and now leases 250,000 square feet at 333 Ludlow Street in Stamford.
NREB: Have any companies made a significant impact by exiting the market?
Rorick: UBS was rumored to be examining the feasibility of moving out of Stamford and into Manhattan. This would have been a major blow to the market since they currently occupy around 1 million square feet of office space in the Stamford market. They have since announced they will be keeping 2,000 employees in Stamford.
NREB: What are your predictions for the office market for next year?
Rorick: The Connecticut market will continue to “normalize,” moving towards a good balance between the supply of space and the net demand for space. We do not expect to see any major changes with vacancy rates and average asking rents.
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