Stamford, CT - Relatively flat trending in Fairfield County office fundamentals masked what actually was an eventful fourth quarter for the market, while Westchester County ended 2016 in almost the same position as it began, but with glimmers of change on the immediate horizon, according to Colliers International Group Inc. (NASDAQ:CIGI, TSX:CIG). The global commercial real estate services firm’s Stamford-based research team on Friday released its fourth-quarter 2016 Office Market Snapshots for the two regions.
The Fairfield County office availability rate dropped just 10 basis points during the final three months of 2016, ending the year at 22.3 percent. “For every occupancy gain it seems that space returned to the market,” noted Jeffrey Williams, Executive Managing Director | Market Leader. “For example, Henkel’s decision to consolidate its operations from Wilton and Arizona into a new lease in the Stamford CBD was balanced out by GE Capital’s decision to market its space in the Stamford Non-CBD.”
The Henkel transaction – involving 152,679 square feet at 11 Elm Street – represented Fairfield County’s largest fourth-quarter office lease. Other notable new commitments included a 67,754-square-foot sublease by Xerox at 201 Merritt 7 in Norwalk and a 40,800-square-foot lease by 5NPlus at 120 Corporate Drive in Trumbull.
Fairfield County pricing remained stable during 2016. Average asking rent climbed 1.2 percent, to $35.71 per square foot, year over year.
· The Eastern Fairfield County submarket evaded any potential setback from GE’s exodus with the quick sale of its former headquarters to Sacred Heart University. Leasing activity, including Sikorsky’s 260,000-square-foot renewal at 1 Far Mill Crossing in Shelton, helped push the availability rate down to 15.6 percent.
· Despite 242,639 square feet in leasing activity during the fourth quarter, the Central submarket’s availability rate expanded by 180 basis points, reaching 24.1 percent. Bridgewater’s restructuring of its business operations was the primary driver.
· After a strong start to the year, asking rents in the Greenwich submarket ended 2016 at $60.96, a 5.5 percent year-over-year decline. The financial services industry continued to dominate activity, illustrated by AQR Capital Management’s 20,174-square-foot lease at 1 Greenwich Plaza.
· The fourth quarter represented a tale of two submarkets within Stamford. The Stamford CBD ended the year with an availability rate of 29.4 percent, continuing three straight years of reductions, whereas the Non-CBD finished its third year of gains, landing at 25.8 percent.
· The Northern submarket continued its steady progress, with the availability rate shrinking by 30 basis points for the quarter, to 15.5 percent – a level not seen since the end of 2008. Asking lease rates increased 1.6 percent (to $24.40 per square foot) during the final three months of the year.
Pace University’s 34,119-square-foot lease at 100 Summit Lake Drive in Valhalla represented Westchester County’s largest fourth-quarter office lease. Other significant commitments included a sublease by Jagermeister at 10 Bank Street and a 23,000-square-foot lease by Bone & Joint at 4 Westchester Park Drive, both in White Plains.
Still, the availability rate climbed 80 basis points during the fourth quarter, settling at 21.9 percent – the same rate seen at the end of 2015. Asking rents have declined slightly by 2.1 percent, to $26.96, year over year.
“Despite a fairly lackluster year for Westchester County, the continued repurposing of existing office stock will likely have a positive impact here in 2017,” said Sean Cullen, Director of Research for Colliers’ Stamford office. “Conversions and continued progress on the approvals for the North 60 biotech development will likely change momentum.”
· In Northern Westchester, IBM’s former headquarters in Somers has been sold, but the future of the property still remains unclear. At this point, it is not being actively marketed for lease. Annual leasing reached its highest point since 2011, partly due to the Pace lease.
· The Southern submarket saw its availability expand to 15.3 percent during the fourth quarter, but it still has the lowest rate in the county. RXR’s planned $150 million mixed-use development will further bolster the attractiveness of this area for prospective office occupiers.
· The East I-287 submarket led the county in leasing activity in the fourth quarter, with 120,107 square feet in commitments – including the Bone & Joint lease. The submarket’s availability rate has decreased year over year, from 22.3 percent to a current 20.4 percent.
· Interest from legal and financial occupiers in the West I-287 submarket helped drive down the availability rate by 150 basis points, to 22.5 percent, representing the largest fourth-quarter decrease in the county. Asking lease rates have also improved, growing 7.3 percent (to $24.98 per square foot) since year-end 2015.
· Annual leasing in the White Plains CBD totaled 524,327 square feet, the second-highest level since 2009. However, newly available space this quarter still expanded– driven largely by a single property at 440 Hamilton Ave., which added 120,000 square feet to the market.