Leasing activity in Fairfield County started off sluggish in the first quarter of 2016, according to JLL.
Tenants signed for 550,000 s/f this quarter, compared with nearly 1.1 million square feet the previous quarter.
Leasing activity in the first quarter of each year across Fairfield County is historically low, and is not a reliable indicator of velocity for the rest of 2016, according to JLL.
During the first quarter, the vacancy rate in Fairfield County remained unchanged compared to year-end 2015 at 24.4 percent.
Over the next few months, significant lease transactions are expected to close with few tenants vacating, which will contribute to a decrease in the county’s overall vacancy rate.
Edward Tonnessen, managing director with JLL’s CT/Westchester office, is optimistic, despite the lack of activity from January thru March. “Increased demand for healthcare space and a growing workforce have driven some owners to reposition buildings to meet the needs of today’s employees and workplace,” he said.
Examples of repositionings include converting office into medical space, or new workplace environments catering to different types of tenants.
Fairfield County recorded 402,225 s/f of positive net absorption in the first quarter of the year, compared with the 413,907 s/f of negative net absorption in the final quarter of 2015.
The finance and banking sectors, as well as healthcare space, accounted for approximately 25 percent of leasing activity this quarter. Two of the largest transactions this quarter took place in the Stamford South/I-95 submarket.
Investment management firm Bridgewater Associates L.P. inked a lease for 137,986 s/f at 2200 Atlantic Street and global commodity merchant Castleton Commodities International LLC signed for 66,012 square feet at Two Harbor Point Square.
The two transactions alone accounted for 132,000 s/f of positive absorption in Class A space at Building and Land Technology’s Harbor Point complex.
Despite the brief slowdown, average asking rents remained stable from the previous quarter.
Increases in Greenwich rents mitigated a slight drop in Stamford’s asking rates. When comparing year over year, the county’s overall rents rose slightly by $0.40 to $31.90 per square foot in the first quarter of 2016.
Comparing the same time period, Class A rents dropped slightly to $34.33 per square foot this quarter, a decrease from $35.17 per square foot.
Leasing activity in Stamford’s CBD downshifted in the first quarter of 2016, although the area’s traditional law firm and financial services tenants continued to renew or lease new space.
The largest new deal transacted in Downtown Stamford was Finn Dixon & Herling LLP, which relocated locally and signed for 26,385 square feet at 6 Landmark Square.
The submarket recorded 13,675 square feet of negative absorption this quarter and has 20 large blocks of contiguous office space of 50,000 s/f or greater available.
The Stamford CBD/Railroad’s overall vacancy rate rose from 26.5 percent in early 2015 to 32.1 percent a year later. Year-over-year, the submarket’s Class A vacancy rate grew to 32.5 percent this quarter, an increase of 22.6 percent (or 6.0 percentage points) from 26.5 percent.
Year-over-year, overall rents in the Stamford CBD/Railroad fell to $43.73 per square foot in the first quarter, a decrease of less than one percent from $43.91 per square foot.
Year-over-year, the county’s Class A rents dropped to $44.41 per square foot this quarter, a decrease of less than 1.0 percent from $44.77 per square foot.
Landlords of Class A buildings in the Greenwich CBD/Railroad submarket took advantage of continued high demand and falling vacancy rates to boost Class A average asking rents above $90.00 per square foot for the first time since the second quarter of 2012.
Rents have climbed as high as $100 psf in Greenwich’s trophy buildings, a rate not achieved since before the recession.
As vacant space is absorbed in Greenwich, upward pressure may be placed on Stamford’s office market, likely resulting in higher asking rents in Stamford’s Class A buildings.
Year-over-year, overall rents in the Greenwich CBD/Railroad rose to $83.99 per square foot in the first quarter of 2016, an increase of 3.0 percent from $81.51 per square foot. Year-over-year, the county’s Class A rents rose to $90.04 per square foot this quarter, an increase of 2.4 percent from $87.89 per square foot.
Overall vacancy rates for Greenwich CBD/Railroad office space have dropped nearly 23 percent in the past five years.