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Fairfield County, CT, sees minor drops in average asking rental rates, minimal increases in vacancy rates for all building classes at year-end 2012
STAMFORD, CT, January 15, 2013 — The Fairfield County, Conn., real estate market demonstrated a slight weakness in the final quarter of the year but ended the year on a positive note, according to Jones Lang LaSalle’s fourth-quarter office stats report. There were signs of stability, particularly within the county’s transit-hub submarkets and a nearly 30 percent improvement in leasing volume countywide compared with 2011. Throughout most of Fairfield County, however, average asking rental rates dropped for nearly all building classes in every office submarket and vacancy rates increased.
“The real estate outlook for Connecticut and Fairfield County is choppy, which is consistent with the general economic picture and local fiscal health,” said Robert Ageloff, International Director and head of JLL’s Stamford office. “There are no clear, discernible demand patterns that point to any sustainable trends or movement up or down. The first half of 2013 will see a drop in velocity that could put short-term pressure on pricing, particularly for the outlying, non-transit assets. The Fairfield County labor market situation is showing a slight rebound, with office-using payrolls adding nearly 300 jobs in the fourth quarter, representing the first quarterly gain since the start of the recession. The labor market remains extremely sensitive to any challenges because the financial services sector, one of the top occupiers in the marketplace, has not yet fully rationalized its workforce.”
The overall vacancy rate in Fairfield County rose to 22.7 percent this quarter, an increase of 2.3 percent (or .5 percentage points) from the overall vacancy rate of 22.2 percent in the third quarter of 2012. The county’s Class A vacancy rate grew to 22.3 percent in the fourth quarter of 2012, increasing 1.4 percent (or .3 percentage points) from the Class A vacancy rate of 22.0 percent the previous quarter.
Fairfield County saw overall and Class A average asking rental rates fall slightly in the final quarter of the year. Overall rents fell to $32.39 per square foot in the fourth quarter of 2012, a decrease of less than 1.0 percent from overall rents of $32.57 per square foot the previous quarter. Rates for the county’s Class A properties dropped to $36.21 per square foot this quarter, a decrease of less than 1.0 percent from Class A rents of $36.41 per square foot in the third quarter of 2012.Velocity picked up in Fairfield County for the third consecutive quarter, with more than 1.2 million square feet in deals transacted during the fourth quarter of 2012. Year-to-date leasing volume totaled 3.5 million square feet, compared with 2.7 million square feet in 2011. Notably, the county saw 76 transactions closed this quarter compared with 90 deals during the previous quarter.
Renewal activity drove leasing volume in the final quarter of the year. In fact, the top six transactions in the final quarter of the year were all renewals. GE is remaining in place at 201 Merritt 7, occupying the entire 240,000 square-foot building on the Route 7 Corridor; Sikorsky Aircraft signed a one-year renewal of 167,000 square feet at two buildings at 1 Far Mill Crossing in the Route 8/Shelton submarket; Encompass renewed 160,035 square feet at 250 Harbor Drive in the Stamford South/I-95 submarket; Shenkman signed a 40,000-square-foot renewal and expansion at 262 Harbor Drive in the Stamford South/I-95 submarket; Viking Global renewed and downsized to 39,952 square feet at 55 Railroad Avenue in the Greenwich CBD/Railroad submarket; and Day Pitney closed on a 39,910 square-foot renewal at 201 Broad Street/Canterbury Green in the Stamford CBD/Railroad submarket.
“Much of this renewal activity was concentrated outside CBD/Railroad submarkets by companies that were averse to taking on significant project budgets for relocations and were also sensitive to disrupting their current employee base,” said Ageloff. “That suggests a firmer dividing line between businesses that will make the capital commitment and pay the rent premium to move to transit locations, and those that will not. What is ironically transpiring in the Class A CBD locations at the moment is an upward trend in rents at the highest-quality spaces in spite of higher vacancy levels. Some landlords are simply holding firm on their high-rent position, which is an interesting approach, and maybe a risky one, to capture the demand for tenants that are willing to pay a premium for immediate proximity to transportation and amenities.”
The Stamford CBD/Railroad submarket recorded a decrease in overall and Class A vacancy rates in the fourth quarter of 2012. The overall vacancy rate fell to 25.1 percent this quarter, a drop of 2.3 percent (or .6 percentage points) from the overall vacancy rate of 25.7 percent in the third quarter of 2012. The submarket’s Class A vacancy rate dropped to 25.5 percent this quarter, falling 3.4 percent (or .9 percentage points) from the Class A vacancy rate of 26.4 percent the previous quarter.
The Stamford CBD/Railroad submarket posted a slight increase in average asking rental rates for all building classes this quarter. Overall rents rose slightly to $45.71 per square foot in the fourth quarter of 2012, an increase of less than 1.0 percent from overall rents of $45.51 per square foot the previous quarter. Rates for the submarket’s Class A product grew to $46.33 per square foot this quarter, an increase of less than 1.0 percent from Class A rents of $45.91 per square foot in the third quarter of 2012.
The Greenwich CBD/Railroad submarket posted a big drop in overall and Class A vacancy rates in the final quarter of the year. The overall vacancy rate fell to 16.0 percent this quarter, a drop of 14.0 percent (or 2.6 percentage points) from the overall vacancy rate of 18.6 percent in the third quarter of 2012. The submarket’s Class A vacancy rate plummeted to 17.0 percent this quarter, dropping 17.9 percent (or 3.7 percentage points) from the Class A vacancy rate of 20.7 percent in the third quarter of 2012.
Average asking rental rates for the Greenwich CBD/Railroad submarket remained stable in the final quarter of the year. Overall rents fell to $83.52 per square foot in the fourth quarter of 2012, a decrease of 2.0 percent from overall rents of $85.19 per square foot the previous quarter. Rates for the submarket’s Class A product barely changed, rising to $89.85 per square foot this quarter from $89.82 per square foot in the third quarter of 2012.
JLL is a leader in the New York tri-state commercial real estate market, with more than 1,750 of the most recognized industry experts offering brokerage, capital markets, property/facilities management, consulting, and project and development services. In 2011, the New York tri-state team completed approximately 15.9 million square feet in lease transactions, arranged capital markets transactions valued at $1.57 billion, managed projects valued at more than $6.8 billion, and oversaw a property and facilities management portfolio of 63.6 million square feet and an agency leasing portfolio of 49.8 million square feet.
About Jones Lang LaSalleJones Lang LaSalle (NYSE: JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47 billion of assets under management. For further information, please visit www.joneslanglasalle.com.
George Shea, Mark Faris - Shea Communications