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News release

STAMFORD, CT

Jones Lang LaSalle Reports Stable Fairfield Office Market in 2nd Quarter of 2013

Fairfield County posts minor drop in overall average asking rental rates, minimal decrease in overall vacancy rates


STAMFORD, CT, July 23, 2013 — The Fairfield County, Conn., commercial real estate market remained mostly stable in the second quarter of 2013, posting minor decreases in vacancy rates and a small drop in average asking rental rates. Robust levels of new and sublease transactions throughout the county may indicate increased confidence, a welcome sign in an otherwise flat market.

“Although hiring seemed to pick up earlier this year, we saw that trend reverse over the past few months,” said Robert Ageloff, international director and head of Jones Lang LaSalle's Stamford/Westchester office. “We seem to have a hard time keeping up with the job growth recorded in much of the rest of the country.

Until the Fairfield County area is viewed more positively as a cost-effective place to do business with promising labor market demographics, a sustainable fundamental and statistical recovery will be difficult. Another persistent trend is the demand and pricing disparity between central business district and railroad access locations versus the outlying more suburban assets. This will continue until core CBD properties are substantially leased or until the county begins to see more demand from New York companies that get priced out of the Midtown market.”

Even if job growth in Fairfield County was more robust, businesses are in a constant re-evaluation of their workspace and real estate strategies. More workers do not necessarily equate to more space, a trend that is reverberating in the office market at midyear 2013. The overall vacancy rate fell to 22.7 percent this quarter, a decrease of less than 1.0 percent (or 0.2 percentage points) from the overall vacancy rate of 22.9 percent in the first quarter of the year. Fairfield County’s Class A vacancy rate dropped to 22.4 percent in the first quarter of 2013, a decrease of less than 1.0 percent (or 0.2 percentage points) from the Class A vacancy rate of 22.6 percent the previous quarter.

Limited touring activity and persistent weak demand for space drove average asking rents down in nearly every submarket and building class in Fairfield County at midyear 2013. Overall rents fell to $33.26 per square foot in the second quarter of 2013, a decrease of 1.7 percent from overall rents of $33.82 per square foot the previous quarter. Rates for the county’s Class A properties dropped to $37.42 per square foot this quarter, a decrease of less than 1.0 percent from Class A rents of $37.64 per square foot in the first quarter of the year.

Although Fairfield County recorded a drop in leasing velocity in the second quarter of 2013, falling to 533,343 square feet compared with nearly 850,000 square feet in the first quarter, several factors should be considered. First, without the 328,000-square-foot renewal signed by Boehringer Ingelheim Pharmaceuticals in the first quarter, quarter-to-quarter leasing volume would have been level. Second, midyear 2013 leasing activity showed robust levels of new and sublease transactions, totaling nearly 400,000 square feet, often an indicator of increased confidence in the marketplace.

Three of the top five transactions completed in the second quarter were new deals:
  • Sikorsky Aircraft Corp. inked a sublease for 38,505 square feet in Building B at 1 Far Mill Crossing in the Route 8/Shelton submarket.
  • The Navigators Group Inc. completed a full-floor sublease for 36,782 square feet at 400 Atlantic Street in the Stamford CBD/Railroad submarket.
  • Phibro LLC signed a renewal for 27,176 square feet at 500 Nyala Farms Road in the Westport submarket.
  • LeadQual LLC took 26,523 square feet of sublease space at 100 Beard Sawmill Road in the Stratford/Trumbull submarket.
  • Shenkman Capital Management Inc. inked a renewal for 20,084 square feet at 262 Harbor Drive in the Stamford South/I-95 submarket.
The high level of sublease space absorbed this quarter boded well for the county’s Route 8/Shelton and Stamford CBD/Railroad submarkets, where sublease availability is high relative to market averages. The Navigator Group’s full-floor sublease at 400 Atlantic Street in Stamford and Sikorsky’s sublease at 1 Far Mill Crossing in Shelton together absorbed more than 75,000 square feet.

Stamford CBD/Railroad
Stamford CBD/Railroad submarket continued to benefit from leasing volume fueled by tenant interest in transit-hub markets. The submarket saw vacancy rates drop in all building classes in the second quarter of the year. The overall vacancy rate fell to 25.8 percent this quarter, a decrease of 1.1 percent (or 0.3 percentage points) from the overall vacancy rate of 26.1 percent in the first quarter of the year. The Stamford CBD/Railroad Class A vacancy rate dropped to 26.4 percent in the second quarter of 2013, a decrease of less than 1.0 percent (or 0.1 percentage points) from the Class A vacancy rate of 26.5 percent the previous quarter. The absorption of space by the Navigators Group was counteracted by Cenveo Inc.’s space coming online in the submarket.

Office buildings throughout the Stamford CBD/Railroad submarket posted a drop in average asking rental rates at midyear 2013, after some superficial rate inflation during the first part of the year.  The premium at 695 E. Main Street remains, but ownership appears to be holding out for an anchor tenant to open the building for leasing. As a result, other area landlords are acting competitively to attract the tenants they can from a limited demand pool.

Overall rents fell to $46.12 per square foot in the second quarter of 2013, a decrease of 1.8 percent from overall rents of $46.97 per square foot the previous quarter. Rates for the submarket’s Class A product dropped to $46.60 per square foot this quarter, a decrease of 2.0 percent from Class A rents of $47.55 per square foot in the first quarter of the year.

Greenwich CBD/Railroad
Although the Greenwich CBD/Railroad submarket did not see the large increase in vacancy rates posted the previous quarter, a shift in transaction volume to Fairfield County’s more periphery submarkets helped push up vacancy rates at midyear 2013. The overall vacancy rate in the Greenwich CBD/Railroad submarket grew to 21.5 percent this quarter, an increase of 3.4 percent (or 0.7 percentage points) from the overall vacancy rate of 20.8 percent in the first quarter of the year. The submarket’s Class A vacancy rate rose to 23.9 percent in the second quarter of 2013, an increase of 4.8 percent (or 1.1 percentage points) from the Class A vacancy rate of 22.8 percent the previous quarter, inflated by sublease space coming online at 33 Benedict. There are already deals in play for that space so the upward movement in the vacancy rate will be short-lived. The inclusion of this lower-priced sublease space also put downward pressure on asking rents.

Greenwich CBD/Railroad submarket recorded a drop in average asking rental rates for all building classes at midyear 2013. Overall rents fell to $82.28 per square foot in the second quarter of 2013, a decrease of 3.8 percent from overall rents of $85.57 per square foot the previous quarter. Rates for the submarket’s Class A product dropped to $86.86 per square foot this quarter, a decrease of 4.7 percent from Class A rents of $91.16 per square foot in the first quarter of the year.

JLL is a leader in the New York tri-state commercial real estate market, with more than 1,600 of the most recognized industry experts offering brokerage, capital markets, property/facilities management, consulting, and project and development services. In 2012, the New York tri-state team completed approximately 23.8 million square feet in lease transactions, arranged capital markets transactions valued at $1.57 billion, managed projects valued at nearly $7.0 billion, and oversaw a property and facilities management portfolio of 102.1 million square feet and an agency leasing portfolio of 76.0 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.