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Fairfield County Office Markets Enters Recovery Period
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Business New Haven
7/8/2002
By:
BNH
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Fairfield County has begun rebounding from the turmoil caused by both the September 11th events and a downturn in the economy in the first quarter of 2002, according to a report published by Insignia/ESG.
Local companies realized that tenant-friendly market conditions could not last in an improving economy, and therefore the time was ripe for seeking expanded space or negotiating lease renewals. Space leased in transactions of more than 50,000 square-feet skyrocketed 231% from the last quarter of 2001. This resulted in an increase in overall leasing of 80% to 896,400 square-feet. For the first time in 18 months, positive absorption of 305,310 square-feet was aided by significant activity and the decline in newly available sublease and direct space. As a result, availability dropped nearly four percent from last December to 7.1 million square-feet, and the availability rate fell almost a percentage point to 15.8 percent.
Dean J. Shapiro, executive director of Insignia/ESG's Westchester-Connecticut operation said, “This performance is statistical evidence of the reality of a recovery...this is actual proof that we are working our way out of the downturn. As the economy continues to improve, Fairfield's office market should reflect those improvements.”
While the numbers appear quite impressive on a quarter-to-quarter basis, a comparison of first quarter 2001 results shows the extent of the downturn on Fairfield's market. Leasing in the first quarter of 2002 amounted to 25 percent less activity than the first three months of 2001. Availability increased 46 percent and the availability rate increased almost five percentage points. Average asking rent fell $2.47 per square-foot to $29.19 per square-foot, reflecting an increase in sublease space.
Leasing picks up
Insignia/ESG's report indicates that many companies postponed real estate decisions out of financial concerns during the first part of 2001. The events of 9-11 compounded the situation, practically ending what little activity was underway. In the first quarter of 2002, signs of life in the national economy revived interest in real estate, resulting in major steps in leasing velocity. In addition to the 80 percent increase in overall activity, every submarket except one saw more commitments compared to the fourth quarter of 2001. The West and East, two segments hardest hit by the economic slowdown, experienced the sharpest turnarounds. Velocity increased 141 percent and 101 percent to 461,670 square-feet and 228,000 square-feet respectively.
Another affect of the economic and social events of last year on the Fairfield County office market was that the few deals that were done after the first quarter tended to be smaller in size. A return in 2002 saw predictably sized transactions. The average transaction size increased over December 2001 by 63 percent; this number fell 32 percent compared to first quarter of 2001.
Shapiro points out that financial service companies took a major role in the budding recovery of 2002. Six of the ten largest transactions were completed by companies in that industry group, including Andor Capital Management's 133,540 square-feet at Greenwich American Center, GE Capital's 64,800 square-feet at 6 Corporate Drive in Shelton and Marsh McLennan's 42,700 square-feet at 601 Merritt 7 in Norwalk. Most financial leases were also done with companies with an existing presence in Fairfield. Says Shapiro: “This is an important step in a market where relocations have always been a strong force, but local firms have provided the underlying strength.”
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