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News release

STAMFORD, CT

Opportunities Abound in Fairfield County Office Market in 1st Quarter of 2013

Fairfield County sees increase in average asking rental rates despite large blocks of vacant space in Stamford CBD/Railroad, Greenwich CBD/Railroad submarkets


STAMFORD, CT, May 1, 2013 — The Fairfield County, Conn., real estate market demonstrated some signs of weakness in the first quarter of the year as vacancy rates increased throughout the county. At the same time, a surge in the amount of high-quality space available and greater confidence in the market by building owners has helped push up rents this quarter. In addition, the county saw a greater than 54 percent improvement in leasing volume compared with the first quarter of 2012.

"The Fairfield County office market is counter-intuitive right now,” said Robert Ageloff, international director and head of Jones Lang LaSalle’s Stamford office. "In the face of increasing vacancy and downward pricing pressure from new, large blocks of sublease space, rents are increasing. Landlords are forward pricing, meaning they are increasing and stabilizing rental rents based on an economic recovery that has not really happened yet, and on increased tenant demand in the market but not actual closed deals."

The overall vacancy rate in Fairfield County rose to 22.9 percent this quarter, an increase of less than 1.0 percent (or .2 percentage points) from the overall vacancy rate of 22.7 percent in the fourth quarter of 2012. The county’s Class A vacancy rate grew to 22.6 percent in the first quarter of 2013, increasing 1.3 percent (or .3 percentage points) from the Class A vacancy rate of 22.3 percent the previous quarter.

Fairfield County saw average asking rents increase in all building classes in the first quarter of the year. The rate boost was the result of a number of factors including the availability of higher-quality, and more expensive, office space throughout the county, and building owners having more confidence in raising rates in a market perceived as less risky. Overall rents rose to $33.82 per square foot in the first quarter of 2013, an increase of 4.4 percent from overall rents of $32.39 per square foot the previous quarter. Rates for the county’s Class A properties grew to $37.64 per square foot this quarter, an increase of 3.9 from Class A rents of $36.21 per square foot in the fourth quarter of 2012.

Deal velocity in the first quarter typically shows a slowdown compared with the year-end rush of the previous three months, and the first quarter of 2013 was no exception. Yet, leasing volume throughout Fairfield County was still markedly higher than the market saw one year earlier. Leasing activity totalled nearly 900,000 square feet, up 54.6 percent from the first quarter of 2012. At the same time, almost half of total volume was attributable to Boehringer Ingelheim Pharmaceuticals’ 328,000-square-foot renewal at 39 Old Ridgebury Road.

Trending in line with the close of 2012, renewals continue to outnumber new transactions, which is a sign of caution in the marketplace.

Major transactions closed this quarter included only two new deals, one of which was an expansion, compared with four new entrants to the market in the final quarter of 2012. State incentive packages have helped to drive this activity. The Governor's “First Five, Next Five, Last Five” initiative to attract companies to Connecticut has resulted in one major lease in the past six months, with another big deal very close to being signed and two more transactions in the pipeline.

The following were the top five transactions for the first quarter of the year: Boehringer Ingelheim Pharmaceuticals renewed 328,000 square feet at 39 Old Ridgebury Road in the Danbury/Bethel submarket; ICON International renewed 76,555 square feet at 107 Elm Street/4 Stamford Plaza in the Stamford CBD/Railroad submarket; EDR signed a new lease for 31,664 square feet of space at 6 Armstrong Road in the Route 8/Shelton submarket; Orthopedic and Neurological Surgery renewed 25,690 square feet at 6 Greenwich Office Park in the Greenwich Non-CBD submarket; and Infogroup Inc. extended its lease of 20,262 square feet at 200 Pemberwick Road in the Greenwich Non-CBD submarket.

The Stamford CBD/Railroad submarket saw vacancy rates increase in all building classes in the first quarter of the year, as large blocks of space at Stamford Plaza and First Stamford Place were returned to the market. In addition, JLL now counts Harbor Point Square as part of the Stamford CBD/Railroad submarket instead of Stamford South. The overall vacancy rate rose to 26.1 percent this quarter, an increase of 4.0 percent (or 1.0 percentage point) from the overall vacancy rate of 25.1 percent in the fourth quarter of 2012. The submarket’s Class A vacancy rate grew to 26.5 percent in the first quarter of 2013, a boost of 3.9 percent (or 1.0 percentage point) from the Class A vacancy rate of 25.5 percent the previous quarter.

An increase in average asking rental rates for Class A product in the Stamford CBD/Railroad submarket more than offset a slight drop in rents for the area’s Class B buildings. Overall rents rose to $46.97 per square foot in the first quarter of 2013, an increase of 2.8 percent from overall rents of $45.71 per square foot the previous quarter. Rates for the submarket’s Class A product grew to $47.55 per square foot this quarter, an increase of 2.6 percent from

Class A rents of $46.33 per square foot in the fourth quarter of 2012.
The Greenwich CBD/Railroad submarket also posted large increases in vacancy rates in all building classes in the first quarter of the year, with large blocks of space at Pickwick Plaza and 33 Benedict Place added to the market. The overall vacancy rate grew to 20.8 percent this quarter, an increase of 30.0 percent (or 4.8 percentage points) from the overall vacancy rate of 16.0 percent in the fourth quarter of 2012. The submarket’s Class A vacancy rate rose to 22.8 percent in the first quarter of 2013, an increase of 34.1 percent (or 5.8 percentage points) from the Class A vacancy rate of 17.0 percent the previous quarter.

Average asking rental rates for the Greenwich CBD/Railroad submarket increased for all building classes in the first quarter of the year. Overall rents grew to $85.57 per square foot in the first quarter of 2013, an increase of 2.5 percent from overall rents of $83.52 per square foot the previous quarter. Rates for the submarket’s Class A product rose to $91.16 per square foot this quarter, a boost of 1.5 percent from Class A rents of $89.85 per square foot in the fourth 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 LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $47.7 billion of real estate assets under management. For further information, visit www.jll.com.