FAIRFIELD, CT-Bucking conventional economic wisdom, rents rose in Fairfield County despite some lackluster performance in the area during the first quarter, according to a new report from Jones Lang LaSalle. Vacancy rates increased throughout the county while there was a strong uptick in the amount of quality space that became available.
Still, building owners' confidence in the market led to a surge in rents, says Robert Ageloff, international director and head of JLL's Stamford office, in the announcement of the report. “The Fairfield County office market is counterintuitive right now,” he says. “In the face of increasing vacancy and downward pricing pressure from new, large blocks of sublease space, rents are increasing. Landlords are forward pricing, meaning they are increasing and stabilizing rental rents based on an economic recovery that has not really happened yet, and on increased tenant demand in the market but not actual closed deals."
The overall vacancy rate in Fairfield County rose to 22.9% in Q1, an increase of less than 1% from the overall vacancy rate of 22.7% in the fourth quarter of 2012. The county's Class A vacancy rate grew to 22.6% in the first quarter of 2013, increasing 1.3% from the Class A vacancy rate of 22.3% the previous quarter.
Vacancy rates in two of the county's key submarkets, the Stamford CBD/Railroad area and the Greenwich CBD/Railroad submarket, experienced even bigger increases. The Stamford CBD/Railroad submarket saw vacancy rates increase in all building classes as large blocks of space at Stamford Plaza and First Stamford Place were returned to the market. The overall vacancy rate rose to 26.1%, a 4% increase from the overall vacancy rate of 25.1% in the fourth quarter of 2012. The submarket's Class A vacancy rate grew to 26.5% in the first quarter of 2013, a boost of 3.9% from the Class A vacancy rate of 25.5% the previous quarter.
An increase in average asking rental rates for Class A product in the Stamford CBD/Railroad submarket more than offset a slight drop in rents for the area's Class B buildings. Overall rents rose to $46.97 per square foot in the first quarter of 2013, an increase of 2.8 % from overall rents of $45.71 per square foot the previous quarter. Rates for the submarket's Class A product grew to $47.55 per square foot in the quarter, an increase of 2.6 % from Class A rents of $46.33 per square foot in the fourth quarter of 2012.
The Greenwich CBD/Railroad submarket also posted large increases in vacancy rates in all building classes in the first quarter of the year, with large blocks of space at Pickwick Plaza and 33 Benedict Place added to the market. The overall vacancy rate grew to 20.8% for Q1, an increase of 30.0% from the overall vacancy rate of 16.0% in Q4 2012. The submarket's Class A vacancy rate rose to 22.8% in the first quarter of 2013, an increase of 34.1 % from the Class A vacancy rate of 17.0 % the previous quarter.
Average asking rental rates for the Greenwich CBD/Railroad submarket increased for all building classes in the first quarter of the year. Overall rents grew to $85.57 per square foot in the first quarter of 2013, an increase of 2.5 % from overall rents of $83.52 per square foot the previous quarter. Rates for the submarket's Class A product rose to $91.16 per square foot this quarter, a boost of 1.5% from Class A rents of $89.85 per square foot in the fourth quarter of 2012.
Still, there was much for building owners and landlords to be happy about. Average asking rents in the county increased in all building classes in the first quarter. Overall rents rose to $33.82 per square foot in the first quarter of 2013, an increase of 4.4% from overall rents of $32.39 per square foot the previous quarter. Rates for the county's Class A properties grew to $37.64 per square foot, an increase of 3.9% from Class A rents of $36.21 per square foot in the fourth quarter of 2012. According to the report's announcement, the rate boost was the result of several factors, including the availability of higher-quality, and more expensive, office space throughout the county, and building owners having more confidence in raising rates in a market perceived as less risky.
Deal velocity showed a slowdown compared to the end of 2012, but that's a typical showing in the first quarter, the announcement states. Yet, leasing volume throughout Fairfield County was drasticaly higher than the market saw one year earlier. Leasing activity totalled nearly 900,000 square feet, up 54.6% from the first quarter of 2012. At the same time, almost half of total volume was attributable to Boehringer Ingelheim Pharmaceuticals' 328,000-square-foot renewal at 39 Old Ridgebury Road. Trending in line with the close of 2012, renewals continue to outnumber new transactions, according to the announcement, which JLL says is a sign of caution in the marketplace.
(RealShare Westchester Fairfield Counties will be held this summer, on Aug. 15. Click the link for more information.)
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
