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News release

STAMFORD, CT

JLL Reports Mixed Start of Year for Fairfield County Office Market

Stamford CBD/Railroad submarket claimed half of large deals completed in 1st quarter of 2014


STAMFORD, CT, April 29, 2014 — JLL reported that the Fairfield County, Conn., commercial office market appeared to weaken in the first quarter of 2013, echoing the cycle of progress followed by contraction that has hampered the county for the past few years.

“Without a doubt, even though in total they leased less space than they had previously occupied, new commitments by Deloitte and Pitney Bowes drove confidence and momentum,” said Robert Ageloff, managing director and head of Jones Lang LaSalle’s CT/Westchester office. “But there was more behind first-quarter activity than just two major employers leasing large blocks of space. Fairfield County also saw increased touring activity by a variety of businesses and industry sectors — key for absorbing space in a market historically dominated by financial services.

Pitney Bowes is one example, but other players like Gartner Group and Charter Communications expanded and a number of non-financial, midsize businesses inked deals. With the financial industry still facing uncertainty, certain buildings throughout Stamford and greater Fairfield County have the opportunity to capture emerging demand from healthcare, education, technology and new media companies.”

Tenants committed to approximately 634,590 square feet of leases in the first quarter of 2014, down from the 850,000 square feet signed in the final three months of 2013 and the 884,333 square feet inked in the first quarter of 2013. Two of Fairfield County’s premier assets — BLT Financial Center/695 East Main Street in the Stamford CBD/Railroad submarket and Stamford Square/3001-3003 Summer Street in the Stamford North/Merritt Parkway submarket — landed the top three deals this quarter. Both properties had been vacant for some time while the owners pursued a repositioning effort.

Deloitte LLP signed for 117,700 square feet at BLT Financial Center, owned by Building Land and Technology; and Pitney Bowes Inc. took 74,181 square feet and Genworth leased 44,597 square feet at Stamford Center, owned by The Ashforth Co. While all three leases helped buoy momentum in Fairfield County in the first quarter of 2014, the Deloitte and Pitney Bowes transactions were examples of how good news for the county’s commercial real estate market comes with a cost.

Deloitte’s deal at BLT Financial Center ensures that the 450,000 square feet remaining available at the building is now officially on the market. In addition, the accounting firm is consolidating into the property from a number of locations in Fairfield County, adding those spaces to the available supply. Although Pitney Bowes’ deal at Stamford Square was a success story for the Stamford North/Merritt Parkway area, the company’s 442,455-square-foot previous location at 1 Elmcroft Road in the Stamford South/I-95 submarket remains vacant, although it may be redeveloped as residential.

All of this added vacancy could place downward pressure on prices throughout Fairfield County, fueling increased work allowances and rent abatements as part of lease negotiations.

Fairfield County’s overall vacancy rate fell to 22.0 percent in the first quarter of 2014, decreasing 3.9 percent (or 0.9 percentage points) from 22.9 percent one year earlier. The county’s Class A vacancy rate dropped to 21.7 percent this quarter, decreasing 4.0 percent (or 0.9 percentage points) from 22.6 percent in the first quarter of 2013.

Overall average asking rents rose to $34.57 per square foot in the first quarter of 2014, an increase of 2.2 percent from $33.82 per square foot one year earlier. Rates for the county’s Class A properties grew to $37.71 per square foot this quarter, an increase of less than 1.0 percent from $37.64 per square foot in the first quarter of 2013.

Stamford CBD/Railroad
Tenants continued to favor the Stamford CBD/Railroad submarket above other submarkets in Fairfield County in the first quarter of 2014.

The submarket claimed two of the four largest transactions completed thus far this year. Deloitte leased 117,700 square feet at BLT Financial Center and Charter Communications expanded its operations at 400 Atlantic Street by an additional 36,782 square feet. Tenants with a total of more than 800,000 square feet in requirements are combing the area for space.

The submarket’s overall vacancy rate fell to 24.6 percent in the first quarter of 2014, a decrease of 5.7 percent (or 1.5 percentage points) from 26.1 percent one year earlier. The Class A vacancy rate dropped to 24.9 percent this quarter, a decrease of 6.0 percent (or 1.6 percentage points) from 26.5 percent in the first quarter of 2013.

Overall average asking rents in the Stamford CBD/Railroad submarket fell to $46.41 per square foot in the first quarter of 2014, a decrease of 1.2 percent from $46.97 per square foot one year earlier. Rates for the submarket’s Class A product dropped to $47.05 per square foot this quarter, a decrease of 1.1 percent from $47.55 per square foot in the first quarter of 2013.

Greenwich CBD/Railroad
The Greenwich CBD/Railroad submarket struggled with a lack of demand in the first few months of the year. None of the major hedge funds and financial services firms face looming lease expirations, having committed to new deals during the recession to capitalize on lower rents. The submarket continued to post an elevated vacancy rate, which was the result of the addition of nearly 70,000 square feet at Greenwich Plaza to the market in the third quarter of 2013.

The overall vacancy rate in the Greenwich CBD/Railroad submarket fell to 20.6 percent in the first quarter of 2014, a decrease of 1.0 percent (or 0.2 percentage points) from 20.8 percent one year earlier. The submarket’s Class A vacancy rate grew to 24.2 percent this quarter, an increase of 6.1 percent (or 1.4 percentage points) from 22.8 percent in the first quarter of 2013.

Overall average asking rental rates in the Greenwich CBD/Railroad submarket fell to $84.10 per square foot in the first quarter of 2014, a decrease of 1.7 percent from $85.57 per square foot one year ago. Rates for the submarket’s Class A product dropped to $87.44 per square foot this quarter, a decrease of 4.1 percent from $91.16 per square foot in the first quarter of 2013.
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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 2013, the New York tri-state team completed approximately 25.9 million square feet in lease transactions, arranged capital markets transactions valued at $2.1 billion, managed projects valued at nearly $7.0 billion, and oversaw a property and facilities management portfolio of 95.3 million square feet and an agency leasing portfolio of 67.0 million square feet.

About JLL
JLL (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 $4 billion, JLL operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3 billion square feet and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $47.6 billion of real estate assets under management. For further information, visit www.jll.com.​