Another step toward recovery for Fairfield County.

Fairfield County took another step toward a sustained recovery in the third quarter of 2004, as growing corporate confidence limited new sublease offerings and encouraged long range planning.

Space commitments increased from the same period of last year, while downsizings and givebacks greatly decreased, enabling positive absorption and lower availability countywide. Stamford, however, proved a continuing challenge, as corporate relocations out of the city overwhelmed what little internal activity was generated and moves into the city grew increasingly rare.

Robert Caruso, Managing Director of CB Richard Ellis' Westchester/Fairfield office feels, however, that while Stamford certainly has its share of difficulties, all signs point toward a more positive turn in the near future.

"We've seen an increase in the number of tenants looking for space in Stamford over the past few weeks, and expect an uptick in leasing velocity in the fourth quarter," he said.

"While we don't expect this improved activity to have a huge impact on the city's availability, it may signal the beginnings of better tidings for Stamford, and the rest of Fairfield County, going forward."

The recovering economy will also go a long way toward repairing the damage in Stamford, which has always been dependent on job growth. Corporate demand should pick up, as it already has to some extent on a national scale and in other parts of Fairfield County, resulting in a generally positive outcome.

As of the end of the third quarter, Fairfield County's overall statistics included:

* An increase in leasing activity of 4% to almost 2.6 million SF

* Positive absorption of nearly 287,240 SF

* Availability 2% below last September at 7.6 million SF, and

* A stable availability rate of 17.4%.

Average asking rent, reflecting the removal of lower priced space as well as growing confidence on the part of non-Stamford owners, grew $1.01 per SF over the past year to $27.00 per SF.

A return to business as usual in terms of new corporate commitments factored heavily in Fairfield County's positive feeling in the first three quarters of the year.

Companies felt more comfortable signing new leases during that time, especially larger corporations that had surfed the market for a long time looking for just the right deal.

The third quarter, especially, saw a noticeable uptick in larger deals, causing the average transaction to bump up 24% from the second quarter to 7,414 SF.

With the amount of space leased in smaller deals remaining constant, this increase in big transactions enabled overall velocity to also jump 40% from the second to the third quarter to 837,810 SE Leasing velocity for the entire first nine months, however, increased just 4% from the same period of last year to 2.6 million SF countywide because of the second quarter's lower activity and tendency toward smaller transactions.

The average transaction also came out almost 1% lower than the same period of 2003 at 7,553 SF.

No where was this increase in transaction size more evident than in Greenwich, which has proven oblivious to the general economic situation due to its address cachet and appeal to financial service firms and hedge funds. Companies like Tudor Investment Group, The Richman Group, Kenmar Advisors, Greenwich Capital and Paloma Partners, flush from an improving stock market, made new commitments based on optimistic projections for the future.

Altogether, the average deal in the town jumped 158% over the past three months to 14,620 SF, propelling total leasing in the third quarter to a level more than triple the previous period.

The impact of financial service firm activity, however, was not limited to Greenwich, and may actually prove THE resource in Fairfield County's overall recovery as space choices in that town become more and more limited. These companies can also claim responsibility for substantial improvements in leasing in Stamford and the Central submarkets, especially in the 90 days from June to September.

Stamford actually saw a 31% jump in velocity during that time to 226,860 SF due to new deals by CRT Capital Group and Jefferies & Company, among Others.

Year-to-date, however, Stamford's leasing activity still added up to 4% less space under contract than the same nine months of 2003.

As leasing improved countywide over the past year, so too did the state of Fairfield's available space supply. Optimism about the economy encouraged companies to make use of their space instead of attempting to recover costs by subleasing it, thereby allowing the absorption of existing availability.

In addition, the conversion of a 214,000 SF building at 55 Federal Road in Danbury to retail use removed an enormous block of available space, vacant for several years, from the market.

Altogether, net absorption in Fairfield County reached 287,240 SF thus far this year, though that number was significantly lower than the 589,810 SF of positive absorption in the same nine months of last year.

Stability in the Central submarket, where stellar velocity in Norwalk far surpassed any new availabilities, also contributed heavily to the county's results.

It came, however, at the expense of Stamford, where much of the space vacated by the Central submarket's new tenants was located.

Altogether, Stamford's CBD and Non-CBD submarkets saw almost 400,000 SF of negative absorption so far in 2004--a major reversal from 57,020 SF of positive absorption in the same time frame of last year.

Stamford, though, was the only area to see such a discouraging number, in addition to the Central segment, all three other submarkets also saw positive absorption this year.

As a result of the positive absorption, countywide available space dropped 2% from September of last year to 7.6 million SF and the availability rate remained basically stable at 17.4%.

Most of this available space--42% in fact--is housed in the City of Stamford which saw its total supply grow 17% from last year as a result of relocations by Diageo PLC, FactSet Research Systems and GE Capital, among others. And in an interesting twist, the Central submarket continues to hold 23% of Fairfield's supply despite substantial leasing this year.

A notable amount of the space leased was never officially available but pre-leased in new construction or the result of creative reorganization of space in a particular portfolio, thus having little effect on absorption or available space. That inventory, though, is down from 27% of Fairfield's overall availability at the end of the third quarter of last year.

While the reduction of the overall supply of available space is certainly good news for Fairfield, some of the space that came back on the market over the past nine months could prove a challenge to lease due to location or price.

Most challenging of all is the fact that as of the end of September, available space exceeding 50,000 SF in size totaled 33 blocks in 3.3 million SF of space, up from 3.0 million SF in 32 blocks at the same time a year ago.

Without a substantial increase in larger transactions, the county may continue to juggle a significantly sized available supply for the foreseeable future, though rumors of tenants currently eyeing the market may alleviate some of this load before the end of the year.

As the old saying goes, perception is everything, and in the third quarter of 2004, that old saying proved true.

Though economic and real estate conditions remained rather sluggish in reality, the perception of a turn in the status quo provided encouragement to many owners never happy with lower prices.

As a result, average asking rent rose $1.01 per SF, or 4%, over the past year to $27.00 per SF.