Fairfield industrial owners benefit from tight market.
For example, Cushman & Wakefield of Connecticut's Stamford office, in conjunction with the Society of Industrial and Office Realtors (SIOR), tracked more than 12 million square feet of industrial space in Norwalk alone in the 1970's. In stark contrast, the firm now tracks approximately seven million square feet, testimony to this market segment's erosion as former industrial properties became obsolete or were converted to other uses.
The decrease in available industrial space and available/affordable land is compounded by the growth and economic well-being of the region, which has prompted the expansion of regional business and industry. Lower Fairfield County remains a desirable location for businesses within the region because of access to a highly-educated labor pool, solid quality of life aspects and accessibility to the region.
The Region's Submarkets
Within the Bridgeport/Stratford submarket, for example, vacancy stands at only 1.2 percent in the urban areas and at 4.4 percent in the region's suburban areas, with the greatest shortage at the smallest properties ranging from less than 5,000 square feet to 20,000 square feet, and at the largest properties offering more than 250,000 square feet. Quality space suitable for high-tech manufacturing or research and development operations is also experiencing substantial shortages. And with a total of only 70,000 square feet of industrial space under construction, business owners are hard pressed to find quality industrial space that will accommodate their growth and meet the standards of the 21st Century.
Lease prices for industrial space within this submarket currently range from $4.75 per square foot to $9 per square foot net. The growth of the region's manufacturing, transportation and construction sectors contributed significantly to its growth in 1998. This, coupled with relocations from other areas within the New York region and higher-cost areas in western Fairfield County, also helped the market advance and contribute to tighter market conditions.
Similar industrial real estate market conditions exist within the Stamford/Norwalk submarket, where the vacancy rate is below 5 percent. Substantial shortages exist for spaces in all ranges, with leasing prices rising. Here, investment demand, as well as pressures to convert former industrial properties to retail, office, apartments and self-storage uses, contributed to tightened market conditions. Indicative of this trend is the activity at Commerce Road Industrial Park in Stamford, where the owners have renovated most of the existing one-story buildings for retailers and for a stock brokerage trading floor. Furthermore, traditional industrial tenants are being priced out of the market, and industrial land for new development is scarce and expensive, often as high as $600,000 per acre. At the current time, only 50,000 square feet of new industrial development is planned for this submarket.
In an effort to capitalize on current market conditions while maximizing the value of their properties, many owners of older industrial buildings with little or no debt are starting to upgrade their facilities to modern, multi-tenant, flex-type space as an alternative to simply selling the facility or leasing it to a single, larger user.
For example, an existing, two-building, 180,000 square-foot industrial complex at Jefferson and Harborview, formerly occupied by Clairol as a distribution facility, has been converted to flex space. The first of two properties to be converted, measuring 120,000 square feet, was successfully leased even before the modernization of the second property was completed, testimony to the acute need for industrial space.
Brownfield sites that have typically sat idle are also now considered viable options for industrial development, as the State of Connecticut is helping companies redevelop these commercial and industrial properties that are underutilized due to possible site contamination in the face of this shortage. Administered by the Department of Economic and Community Development in cooperation with the Department of Environmental Protection, the Special Contaminated Properties Remediation and Insurance Fund (SCPRIF) provides loans to complete environmental site assessments and for the demolition of existing structures necessary to prepare a property for re-use.
In addition, the State of Connecticut and local communities are working together to help retain business and industry within the region by making properties available and offering financial incentives to offset development, modernization or other costs of doing business. For example, aggressive programs within enterprise zones in Stamford, Bridgeport and Norwalk offer tax abatements and other forms of financial relief and have been instrumental in attracting and retaining industry within the region.
While new development within the Bridgeport/Stratford market has been hampered by a scarcity of land, coupled with congested roadways (which has prevented some companies from developing within the region), prospects for the remainder of 1999 and 2000 are excellent. The promotion of industrial use of city-owned land in Bridgeport, for example, coupled with low interest rates projected for the remainder of 1999, promises to spur new construction and modernization. Construction o f manufacturing and R&D facilities, in particular, is expected to increase by as much as 10 percent in 1999 in this region.
The Stamford/Norwalk market is similarly faced with a shortage issue, and while some companies have opted to leave this submarket, their relocations to other parts of Fairfield County will help keep employees in the region and continue to contribute to its robust economy. Still, sales prices of manufacturing and warehouse/distribution properties are expected to increase between 6 and 15 percent in 1999.
With the continued shortage of industrial properties in lower Fairfield County, companies will be challenged to identify space that will meet their current and growing business needs so readily, However, with a willingness to explore other options, as well as to take advantage of special incentive programs, many of the region's largest and most successful industrial operations will continue to look to Fairfield County as home for this future growth.
Sal L. Buono, SIOR, Director, Cushman & Wakefield of Connecticut, Inc.
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|Title Annotation:||Fairfield County, Connecticut; The Boroughs/Suburban Markets|
|Author:||Buono, Sal L.|
|Publication:||Real Estate Weekly|
|Date:||Jun 9, 1999|
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