Fairfield market lacking momentum, says C&W report.
"Notwithstanding the rather unimpressive statistical activity, there appears to be quite a bit of activity in the transactional pipeline," said Jim Fagan, senior managing director and head of Cushman & Wakefield's Fairfield and Westchester County and Long Island offices. "Real estate transactions take a long time to complete. While the statistical numbers are important, the manner in which you interpret those numbers and the trends that are identified provide a more accurate picture."
At the end of the quarter, overall absorption was negative 180,343 square feet (sf), increasing the year-to-date overall net absorption total to negative 450,738 sf. Leasing velocity slowed in the second quarter, registering only 544,079 sf leased versus 895,847 sf leased in the first quarter. Despite the slowdown in leasing activity, the market improved significantly from one year ago. The overall vacancy rate in the county dropped from 20.3% at the same time last year to 18.4% currently.
The absence of large tenants in the market was one of the main causes of the decrease in leasing activity in the second quarter. Diageo North America and Paloma Partners signed leases in the first quarter that combined for over 380,000 sf. In contrast, the two largest leases in the second quarter were signed by divisions of GE, one in Norwalk at 401 Main Street for 30,074 sf and the other at One Corporate Drive in Shelton for 29,000 sf. However, despite the absence of large transactions, a number of major transactions are in various stages of contemplation or completion.
The Fairfield County economic environment continued to improve during the second quarter as the job market improved. The unemployment rate in Fairfield County reflects the improving job market, decreasing from 5.2% in July 2003 to its current level of 4.1%.
"The Fairfield County economic environment has continued to improve and the subsequent local creation of jobs and increased business capital spending will translate into more real estate office-space activity," Fagan added. "At present, the market seems to be quite active, this just hasn't yet been reflected in the numbers."
The submarket with the most leasing activity in the second quarter was the Stamford Non-CBD with 115,103 sf, more than four times the amount in the second quarter 2003. XL America, Templeton Qualitative Advisors and Cardiology Associates of Fairfield County combined for over 50,000 sf of leasing activity. Despite the improved activity, the Stamford Non-CBD registered negative absorption of 21,212 sf.
Direct office rental rates changed little relative to year-end 2003 and the first quarter 2004. Direct asking rents in the county averaged $27.38 per square foot (psf), ranging from $44.70 psf in Greenwich to $19.07 psf in Bridgeport.
Significant investment sales activity was limited in Fairfield County over the first half of the year. Investor demand remained strong and additional sales are expected to occur in the second half of the year. Investment activity was highlighted by R.D. Scinto's $15.3 million purchase of 2 Trap Falls Road, a 168,500 sf building located in Shelton.
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|Publication:||Real Estate Weekly|
|Date:||Aug 11, 2004|
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