STAMFORD, CT - Pockets of the Fairfield County office market registered gains in the second quarter although a handful of large blocks of space inflated the availability rate, while Westchester County asking rates rose slightly, according to Colliers International Group Inc. (NASDAQ:CIGI, TSX:CIG). The global commercial real estate services firm’s Stamford-based research team today released its second quarter 2018 Office Market Snapshots for the two regions.
The Greenwich and Stamford submarkets continued to post positive activity, but rumored interest among some large occupiers wasn’t enough to prop up leasing across the County, which fell 44.5% below the five-year quarterly average to 495,304 square feet. Concurrently, the average asking lease rate dipped from last year, falling $0.14 per square foot to $35.95.
“Newly available space at 383 Main Ave. in the Central submarket contributed to half of the 60 basis point increase in the availability rate, which rose from last quarter to 24 percent,” said Sean Cullen, director of research for Colliers’ Stamford office. “With the exception of the Greenwich and Stamford submarkets, availability rose across the entire county.”
· The Eastern submarket led the County with 160,070 square feet of leases signed, but newly available space pushed the availability rate up 50 basis points from last quarter to 15.5 percent, still the lowest rate in the County. The largest lease, Survey Sampling International’s renewal of 47,765 square feet at 6 Research Drive in Shelton, couldn’t reverse the climb in availability rate.
· The Central submarket’s availability rate increased 280 basis points from last quarter, reaching a record 26.9 percent. A primary contributor was the marketing of Reed Exhibition’s space at 383 Main Ave. in Norwalk, although Reed has not officially announced a relocation decision. Despite the high availability rate, the average asking lease rate rose for the second quarter, climbing 2.4 percent from last year to $31.64 per square foot.
· Greenwich continued to post impressive submarket activity as availability decreased for the fifth consecutive quarter to 16.6 percent, thanks to activity like Eagle Point Credit taking 20,000 square feet at 600 Steamboat Road. The 120 basis point drop from last quarter marked a low not seen since Q2 2009. As space conditions continue to tighten, the average asking lease rate rose moderately over last year, by $0.30 per square foot to $66.00.
· The availability rate in Stamford’s CBD and Non-CBD submarkets showed modest improvement, buoyed by notable transactions like Perkins Eastman, which took 13,000 square feet at 677 Washington Blvd. The transaction was not one of the largest leases this quarter, but the company was the first to sign at the Class A building since UBS vacated it in 2014 – a potential harbinger of better things to come for that building and for the submarket overall. During the quarter, the Stamford CBD availability rate dropped by 20 basis points to 32.9 percent and the Stamford Non-CBD fell by 30 basis points from last quarter to 28.1 percent.
· The overhang of space in 2017 in the Northern submarket kept the availability rate frozen from last quarter at 15.7 percent, but leasing activity in the submarket remained almost identical to the five-year quarterly average at 40,447 square feet. New supply and demand have largely been in check in recent quarters, but the average asking lease rate dropped 7.2 percent from last year to $22.15 per square foot, as new supply is priced lower than recently leased space. Significant activity in the second quarter included Owl Cyber Defense Solutions, which took 30,230 square feet at 42 Old Ridgebury Road in Danbury.
The average asking lease rate in the Westchester County office market shrugged off the fourth consecutive quarterly increase in availability rate, which rose to 22.3 percent, 40 basis points higher than the year-ago level. Leasing activity totaled 227,162 square feet, roughly half of the trailing five-year quarterly average as newly available space slightly outweighed demand.
“Underlying potential in the Westchester market helped the average asking lease rate to remain stable, rising 1.3 percent from last quarter to $26.81 per square foot,” noted Cullen. “This likely reflects the variety of occupiers in the market, although economic uncertainty coupled with the market’s aging inventory are weighing it down.”
· The Northern submarket continues to register the highest availability rate in the County at 37.0 percent, but the former headquarters of IBM and Pepsi account for 60.8 percent of that total. Excluding those two spaces would drop the submarket’s rate to only 13.7 percent, equal to the level typical smaller occupiers face. That did not help the average lease rate, however, which fell 5.6 percent since last year to $24.94 per square foot.
· The Southern submarket continued to claim to the lowest availability rate in Westchester County, despite a 10 basis point uptick in the availability rate from last quarter, to 10.8 percent. Major residential and mixed-use development projects in cities like New Rochelle and Yonkers will ultimately make the submarket more attractive to office occupiers. The activity helped to drive an increase in the average asking rate to $25.81 per square foot, from $25.45 in the first quarter. Future results, however, will likely be constrained by the limited supply of quality office space.
· The East I-287 submarket improved as Standard Life Insurance’s new 21,793-square-foot lease at 333 Westchester Ave. in White Plains — the largest lease in the County — drove the availability rate down 60 basis points this quarter to 18.3 percent. As demand rose, the average asking lease rate climbed 2.1 percent year-over-year to $28.18 per square foot. The investment sales market was also healthy, with RPW purchasing 925 and 1025 Westchester Ave. in White Plains, and the pending disposition of SL Green’s Reckson Executive Park in Rye.
· The West I-287 submarket saw asking lease rates rise for the third consecutive quarter, gaining 3.5 percent from last year to $25.57 per square foot, even though the availability rate climbed 180 basis points in the quarter to settle at a record 25.3 percent. Despite the increase, asking lease rate continued to rise as more expensive space was brought to the market. While conditions have weakened, a handful of potential repurposing projects and reports that many occupiers are seeking space in this area seem to signal a stronger market in the near future.
· White Plains CBD activity was headlined this quarter by Societe Generale’s 17,728-square-foot renewal at 44 South Broadway. Although there were no blockbuster deals, numerous smaller occupiers helped set a floor on leasing activity, which was only 18.9 percent lower than the five-year quarterly average at 93,031 square feet. The availability rate was 16.8 percent, 20 basis points higher than last quarter but significantly below the high of 26.2 percent in Q4 2016. Consequently, the average asking lease rate continues to climb, hitting $34.92 per square foot, a three percent premium from a year ago.