Momentum gathers in Fairfield's commercial market.

Fairfield County's movement toward recovery, and even growth, in its commercial real estate market accelerated in 2004 as the improving economy encouraged corporate confidence, employment stability and forward planning.

New sublease offerings virtually disappeared while leasing, driven by space upgrading and some expansion, increased, enabling positive absorption and a drop in availability for the second straight year.

Availability, in fact, has finally fallen to pre-9/11 levels at 7.3 million s/f, though the county still has a long way to go to reach the 4.0 million s/f of available space seen at the end of 2000.

Should absorption continue at the pace seen in 2004, however, it could come sooner than expected.

With new sublease offerings rare and leasing 3% higher than last year at almost 3.3 million s/f, absorption for 2004 reached an impressive 422.260 s/f--its highest level since 2000.

The availability rate, subsequently, fell more than a percentage point to 16.9%. Of that available space, 27% is considered sublease, down from 32% last December. Average asking rent, primarily as a reflection of the removal of inexpensive space in the Northern submarket, rose 38 cents per s/f over the past year to $26.87 per s/f.

Robert Caruso, Managing Director of CB Richard Ellis' Westchester/ Fairfield office, sees all of this as a sure sign that Fairfield is back on track. "When you see leasing increase and sublease space drop like it did this year, that's an indication that the business community has confidence again, and future progress is likely. And, though some areas are recovering faster than others and the county still has some challenges ahead, I think 2005 should be a strong year."

A large portion of the credit for that decisive turn in 2004 goes to the Central submarket, and the City of Norwalk in particular, where aggressive landlords and developers motivated tenants to make commitments at a rate similar to the high tech boom of the late 1990's.

In total, leasing in the Central segment jumped almost 6% from last year to almost 1.3 million s/f. Greenwich, still riding the tide of financial service obsession with address cache, also played a major role in Fairfield's improvement in 2004 as even secondary properties saw impressive interest.

Leasing in the town jumped 15% from last year to 505,580 s/f or 15% of Fairfield's annual total, primarily as a result of activity at Greenwich American Center. And, though Stamford still struggled, the city also appeared at a crossroads--leasing increased 4% from 2003 to 774,100 s/f due mostly to transactions in the Non-CBD segment.

None of these, however, were relocations--a major factor in past growth in both Stamford and Fairfield overall, and a major impediment to future progress without a significant uptick soon.

In 2004 in fact, space leased as relocations into Fairfield reached their lowest level in history at 110,300 s/f. Instead, most of Fairfield County's leasing came from internal movement as companies took advantage of aggressive deal terms to trade up to newer space. Norwalk saw much of this activity as firms like Diageo PLC and GE Commercial Finance left Stamford and Greenwich for space in more accessible, less costly prime buildings. This activity, and the anticipation of more moves in the future, also encouraged the first speculative construction in Lower Fairfield in a decade. 901 Main Avenue, a 360,000 s/f office building located right next to Diageo's new Norwalk headquarters, should be completed in 2006.

The leasing of space in that building, however, could prove interesting should tenants continue to act conservatively in their space commitments. In 2004, 64% of all transactions completed in the county measured less than 25,000 s/f in size, up from 59% last year.

Most of those were actually less than 10,000 s/f, an indication that corporate Fairfield, while confident, is now hedging bets on the future by only leasing space they know they need. As a result of this hesitancy, the average transaction size decreased 4% over the past year to 7,319 s/f.

The growth of these smaller transactions can also been seen in a positive light, though--as the bread and butter of Fairfield's market, these smaller tenants are extremely important to its stability.