Connecticut’s Fairfield County Office Market Displays Healthy Indicators
AQR Capital's 90,000-square-foot lease expansion at One Greenwich Plaza reflects the healthy fundamentals of the Fairfield County office market.
Connecticut’s Fairfield County ranks among America’s 40 wealthiest counties with a median household income of $81,268 in 2010. And while some of its current office market data stand at low levels, many indicators point to a bright future.
Year-to-date office leasing activity reached 1.7 million square feet as of the third quarter. This amounts to a 21 percent increase relative to the same period one year ago.
While this figure stands 3.1 percent below the five-year historical average, overall leasing volume does not take into account a 500,000-square-foot, build-to-suit lease undertaken by Charter Communications at Gateway Harbor Point in Stamford.
For the quarter, aggregate office leasing in the county totaled 555,629 square feet. Stamford and Greenwich accounted for more than 77 percent of the total. Major transactions included Bank of America’s 166,000-square-foot lease at 600 Washington Boulevard in Stamford and AQR Capital’s 90,000-square-foot expansion at One Greenwich Plaza.
In August, Stamford scored its most impactful corporate attraction of the year when the German-based multinational Henkel moved its North American headquarters from Scottsdale, Arizona, to 155,000 square feet within the BLT Financial Centre at 200 Elm Street. The consumer products firm said its laundry, beauty and home-care divisions are employing approximately 425 people, and that it expects to boost this workforce by about 75 next year.
Henkel has been aiming to achieve new synergies in Connecticut after last year’s $3.8 billion acquisition of Sun Products, a laundry and home company based at 60 Danbury Road in Wilton. This October, Henkel continued to fortify its Connecticut presence through the $485 million purchase of Zotos International, a Darien-based hair product firm.
Stamford has also recently benefited from a succession of intra-county relocations that reflect the “re-urbanization” trend playing out in markets nationwide.
Some prominent tenants that have departed more suburban-flavored submarkets in favor of Stamford include Octagon, a sports and entertainment agency, which relocated from Norwalk; Cara Therapeutics, a biotech firm that moved from Shelton; PartnerRE, a reinsurer that departed Greenwich; and First Reserve, an energy investment company that also moved to Stamford from Greenwich.
Despite the strong level of activity, Fairfield County’s overall vacancy rate stood at its highest recorded level in more than a decade, reaching 23.6 percent at the end of the third quarter. The increase was predominantly the result of Sun Products’ office consolidation in Wilton in the aftermath of the Henkel acquisition, which injected 82,851 square feet of vacant space.
Also boosting vacancy was Bridgewater Associates’ giveback of more than 115,000 square feet of space at 10 Westport Road, also in Wilton. Furthermore, Starwood Hotel’s recent acquisition by Marriott contributed to more than 300,000 square feet of sublet space becoming available in downtown Stamford. All in all, Fairfield County has recorded 753,054 square feet of overall negative absorption in 2017 thus far.
Fairfield’s overall average asking rents remained relatively unchanged, dropping $0.83 per square foot from one year ago, to $33.78 per square foot. Greenwich, however, witnessed a $4.54 per-square-foot, year-over-year increase in its overall average asking rent to $66.02 per square foot. The Fairfield County submarket with the second-highest overall asking rent behind Greenwich was the Central area, at a level of $38.77, followed by Stamford at $36.30. In spite of an increase in some asking rents, overall, taking rents have declined over the past 12 months.
To help maximize occupancy, landlords — just as in many other markets — often give tenants healthy incentive packages to relocate or remain in their buildings. In Fairfield County, these packages seem to have remained stable over the past six months both in terms of free rent being offered for executing a lease, as well as financial packages offered to help cover tenant improvements.
— By Jim Fagan, managing principal and market leader for Connecticut, Cushman & Wakefield. This article first appeared in the December issue of Northeast Real Estate Business.