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Article States Office Rents Are Rising in Several Markets:

February 2nd, 2012

Will the Fairfield/Westchester Market Follow This Trend?

We thought you’d be interested in the below article as published on CoStar. Please note that we have only included paragraphs that pertain to the office market. It is our opinion that our regional market has lagged that of the “hot” markets noted below, but predict that these trends will start to occur in our area in the late stages of 2012. For the complete article please click on the following link: http://www.costar.com/News/Article/Landlords-Poised-to-Regain-Upper-Hand-In-Recovering-Office-Market/135292

Landlords Poised to Regain Upper Hand in Recovering Office Market

2011 Sees Office Leasing, Sales and Pricing Improve Amid Growth In Office Jobs and Rising Tenant Demand. Outlook Has Landlords Preparing to Sing: “Our Day Will Come”

Offce space absorption doubled during 2011 as the office-using job base expanded and vacancies declined across nearly two-thirds of U.S. submarkets, CoStar Group reported this week in its Year-End 2011 Office Review & Outlook. The report presented to CoStar clients found that positive momentum in office fundamentals and the continued absence of new construction is expected to result in higher rents for building owners over the next few years.

CoStar reports the outlook appears to increasingly favor building owners in coming years as the cycle continues.

“To sum it up, for the office market, we’re just now getting started. Now is a good time to be an office investor,” said Walter Page, director of research for Property and Portfolio Research (PPR), CoStar’s analytics and forecasting division. “We expect vacancy to continue to decline through 2015, and when you have declining vacancy rates, you can raise rents, returns are better, and for an investor, that’s good news.”

CoStar Group founder and CEO Andrew Florance noted that, although overall employment growth has been anemic, the U.S. posted a solid 1.7% gain in office-using jobs, led by technology and energy markets such as Seattle, Boston, San Francisco and Dallas.

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The 2012 Norwalk Office Market

January 26th, 2012

As we begin the New Year, we are still plodding along the bottom of the office space market in the Lower Fairfield County region. Attractive rental rates, generous amounts of free rent and large tenant improvement allowance continue to exist in today’s market, although on a building-by-building basis.

In Norwalk, the following eight buildings offer tenants who are renewing and/or relocating a wide variety of choices:

• Merritt 7: This 6 building complex consisting of 101, 201, 301, 401, 501, and 601 Merritt 7 now has 324,000sf available on a sublease or direct basis, with available suites ranging in size from 1,500sf to 50,000sf.

Due to a change in their on-site management and brokerage teams, this complex is ready to roll-out an aggressive marketing package in 2012.

Amenities in this complex include an on-site cafeteria, fitness center, conference center, concierge, newsstand, barber shop, car detailing, dry cleaners, ATM banking, dual fiber loops and a shuttle to the South Norwalk train station.

• 535 Connecticut Avenue: This 173,000sf building was recently sold. With a new ownership/management/leasing team in place and an extensive renovation of much of the common area completed, this building will be offering very attractive rental rates to new tenants. With a fitness center, cafeteria, building conference room, and concierge all on-site (which is unusual for a building of this size to have this many amenities), we expect this building will now aggressively compete with other Norwalk buildings.

• 383 Main Avenue: This 255,00sf building has 53,000sf of available space with units ranging in size from 2,000sf to 31,000sf. This building competes directly with the Merritt 7 complex and promotes its on-site concierge, cafeteria, fitness center, and covered parking.

The first half of 2012 remains an excellent time for tenants who are searching for new office space or negotiating renewals to secure attractive short and long-term lease positions offering flexibility via expansion, contraction, renewal and cancellation options. We predict, however, a tightening in some markets and on a building-by-building basis, with fewer incentives available as we move through 2012.

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The 2012 Greenwich Office Market

January 19th, 2012

Attractive rental rates, generous amounts of free rent and large tenant improvement allowances continue to exist in today’s market, although on a building-by-building basis. The area of Greenwich with the most availability for tenants is the western portion, which lies at the border of Westchester County along the West Putnam Avenue corridor.

Eleven buildings located in this area of Greenwich will see leasing activity in 2012:

• 777 W. Putnam Avenue: An extensive renovation of the building was completed in 2011 consisting of new mechanicals/HVAC, roof, lobby, elevator cabs, common bathrooms, and landscaping. With over 79,000sf still available, this 130,000sf building with amenities such as a concierge, shuttle to train, food service and covered parking is poised for continued leasing activity.

• Greenwich Office Park: This 9 building complex consisting of 425,720sf has 102,085sf available on a sublease and direct basis. Suites vary in size from 2,200sf to 13,000sf. The complex has an on-site fitness center and cafeteria, and offers a shuttle to the train station.

• 500 West Putnam Avenue: This 115,000sf building is offering two large blocks of space, mainly 19,335sf and 20,617sf. We would expect the landlord would subdivide the space into smaller units.

Buildings within a half mile of the Greenwich train station enjoy a lower vacancy rate than the balance of the market and was the first market segment to tighten.

The first half of 2012 remains an excellent time for tenants who are searching for new office space or negotiating renewals to secure attractive short and long-term lease positions offering flexibility via expansion, contraction, renewal and cancellation options. We predict, however, a tightening in this market on a building-by-building basis, with fewer incentives available as we move through 2012.

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The 2012 Stamford Office Market

January 12th, 2012

As the national economy continues its slow recovery, and we begin the New Year, we are still plodding along the bottom of the office space market in the Lower Fairfield County region. Attractive rental rates, generous amounts of free rent and large tenant improvement allowance continue to exist in today’s market, although on a building-by-building basis.

In Stamford, the following buildings should influence the market significantly:

• 695 East Main Street: With Building & Land Technology’s recent purchase and planned extensive renovation of the building we expect leasing activity to commence and continue throughout the year.

• Harbor Plaza – 181, 208, 232, 250, 262, & 290 Harbor Drive: With George Comfort & Sons recent purchase of the complex we expect an aggressive marketing campaign and extensive renovations to the complex with over 440,000 square feet available in buildings 181, 208, 262, and 290. Look out for several deal announcements in 2012.

• 1 and 2 Harbor Point: These buildings are well-positioned for some robust activity as they are the only brand-new buildings in the area and will benefit from the continued development of the South End that also includes new residential development, restaurants and retail.

• 3001 Summer Street: The building has undergone an extensive renovation in 2011 and is well-positioned to land some significant deals in 2012.

Buildings within a half mile of the Greenwich and Stamford train stations enjoy a lower vacancy rate than the balance of the respective markets and were the first market segments to tighten.

The first half of 2012 remains an excellent time for tenants who are searching for new office space or negotiating renewals to secure attractive short- and long-term lease positions offering flexibility via expansion, contraction, renewal and cancellation options. We predict, however, a tightening in some markets and on a building-by-building basis, with fewer incentives available as we move through 2012.

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UPDATE: Office Space within 1/2 Mile of Stamford Train Station

January 5th, 2012

As we start the New Year, we have continued to track the availability of 10,000 square foot (sf) suites within one-half mile of the Stamford Train Station. Compared to last year we determined that the market has stayed fairly stable and the only major change this year is that there is no longer a Class B building that has a 10,000sf suite available. In April there were 27 suites, 26 in July and 33 now in January.

The results below show the amount of 10,000sf or larger suites available:

# of Buildings # of Suites
Class A 12 33
Class B 0 0

The Class A Buildings are:
- 300 Atlantic Street
- 400 Atlantic Street
- 2187 Atlantic Street
- 100 First Stamford Place
- 200 First Stamford Place
- 300 First Stamford Place
- 1 Harbor Point Square
- 2 Harbor Point Square
- 1 Station Place
- 201 Tresser Boulevard
- 680 Washington Street
- 1010 Washington Boulevard

The 12 Class A buildings have 1,140,644sf of available space, (823,571sf on a direct basis and 317,073sf of sublease space) versus 874,240sf in July and 913,239sf in April. The current vacancy rate of these buildings is 36%, which represents an 8.1% increase in availability since last July. It should be noted that the available square footage increased by 266,404sf, which represents a 30.4% increase since July.

The one Class B building that has dropped off the list is 1 Dock Street, which offered only 1 suite of 18,954sf back in July.

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Commercial Real Estate Timing

December 29th, 2011

The saying that timing is everything holds true for commercial real estate as well. Say you are planning “just to renew” your current space. Well, if you wait until just before your lease expires, you will lose any leverage you might have been able to create with your current landlord. Your landlord will know that you really have no time to look anywhere else, negotiate a lease, build-out the space to meet your specific needs, and finally relocate. They also know the number of concessions you will be able to achieve, from a low base rent to advantageous lease clauses, will be minimized.

Larger organizations will incur even greater penalties for procrastination because it may be more difficult to find alternatives in the market, and the need for business continuity may outweigh the ability to get the best deal. As a rule of thumb, organizations looking to renew or relocate who need 10,000 square feet or more should start at least 12 months in advance by hiring a commercial real estate broker. For 50,000 square feet or more, we recommend a year and a half.

Starting at the wrong time affects more than just negotiating leverage. It can detract from the thoroughness of the real estate search process, the number of factors you can take into consideration, and your ability to properly coordinate a build-out for new space or within your existing suite without impacting your business continuity. This, in turn, lowers the number of sites you can consider since a fair amount of available space is raw or old and needs construction to become “business-ready.”

Your commercial real estate lease can be one of the most expensive items on your balance sheet outside of employee salaries. So, give your real estate decisions the attention they deserve!

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Leasing Caveats

December 22nd, 2011

The number of leasing caveats transcends a single blog post, but one of the most important ones involves hiring the right professionals to do the job. This includes a commercial real estate broker, architect and attorney, at a minimum, because they will help you address key elements in the real estate search process.

A common oversight involves the renewal versus relocation option. However you come down on this issue, you should always pursue both to maximize your leverage and get a full sense of the market options.

To do so, you must also accurately evaluate your square footage needs. These can vary based on office configuration, and an architect can often suggest alternatives, both in general and for a specific build-out, to minimize the overall square footage needed and reduce your costs accordingly.

Other fundamental considerations include the length of the lease and the actual location. Longer leases can help you to lock in a favorable base rent, but you should simultaneously ensure they contain some flexibility with possible opt-outs should conditions change. For location, you should ensure that you do not affect employee retention or new hiring by considering ease of commute, nearby restaurants and other physical elements in your new area.

Also, remember the political saying: trust but verify. This includes measuring the square footage yourself, checking the condition of the infrastructure and double checking any landlord assertions where there is an element of doubt.

Finally, don’t procrastinate. Make sure you start the real estate search process early to maximize your leverage and ensure business continuity.

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UPDATE: Office Space Within a Half Mile of White Plains Train Station

December 15th, 2011

As the New Year approaches, we tracked the availability of 10,000 square foot (sf) suites within a half mile of the White Plains train station and determined the market has been stable throughout 2011. In February, 12 buildings offered space; in August, 13 buildings; and in this month, the same. In February, we verified 27 suites; in August, 25 suites; and in this month, 26. The square footage of the current 13 buildings totals 2,729,499sf.

The results categorized by Class are:

# of Buildings # of Suites
Class A 8 15
Class B 5 11
Total: 13 26

The Class A buildings are located at:

  • 10 Bank Street
  • 150 Grand Street
  • 360 Hamilton Avenue
  • 1 North Lexington Avenue
  • 50 Main Street
  • 123 Main Street
  • 11 Martine Avenue
  • 7 Renaissance Square

The Class B Buildings are located at:

  • 55 Church Street
  • 95 Church Street
  • 10 County Center Road
  • 170 Hamilton Avenue
  • 12 Water Street

The new Class A building on our list is 11 Martine Avenue. The available space in all of the Class A buildings is 393,053sf — 370,436sf of direct space and 22,617sf of sublease space. These statistics compare to 356,966sf of direct space and 20,264sf of sublease space in August, and 367,433sf of direct space and 26,245sf of sublease space in February.

The new Class B building on our list is 95 Church Street. The available space in the Class B buildings totals 226,001sf — 208,001sf of direct space and 18,000 sf of sublease space. The direct space compares to 218,889sf in August and 181,306sf in February with the sublease space remaining constant in all three months. Despite these minor fluctuations, the overall market can be categorized as stable.

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Commercial Relocation Team

December 8th, 2011

Commercial relocation in today’s complex business environments often involves more than just a commercial real estate broker; it could also encompass an architect, real estate lawyer, construction firm and maybe a project management organization as well. So when starting the relocation process, you should form an initial team of experts and, as the process unfolds, be open to adding new members.

The best teams involve experts who interact at a senior level. This facilitates rapid decision-making as new issues arise because there is no need to pass through extra layers of bureaucracy before a decision is reached.

In addition, team members should have some cross-knowledge of each other’s area of expertise. This type of overview helps to determine when it is appropriate to bring in an existing member of the team for a specific decision or whether an entirely new one is needed.

The best teams also should consist of individuals with extensive experience in the commercial real estate market and in the region under consideration. They will understand how to balance cost, quality and speed in the multitude of decisions that need to be made during the search and negotiation process for a renewal and/or relocation.

All of these decisions in one way or another will impact directly on the total cost of the transaction over the term of the lease. A landlord will often offer perks or a lower base rent if you can occupy a space quickly, especially if it is currently vacant and thus non-revenue producing.

The structure of the commercial real estate team may vary based on the task at hand; a flexible arrangement of experienced professionals, predominately senior management with a broad focus, will always prove the best.

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Commercial Real Estate and Down Markets

December 1st, 2011

The commercial real estate market follows the same business cycle as the rest of the economy, and there are several advantages to leasing during down markets just like the stock market. Great deals are available provided the right negotiating team knows what to ask for and how to do so.

While base rents can be lower than asking prices by 15-to-30 percent, other concessions can be negotiated as well. In many cases, the landlord will pay for the build-out and include favorable lease clauses for a number of contingencies. For example, a tenant can often negotiate options for a more flexible lease for future expansion or consolidation. Companies can obtain a right of first offer, requiring a landlord to notify them first if a specific space becomes available. Conversely, a right to downsize lets tenants decrease their space.

Other lease term clauses can be negotiated as well. You can make sure there are no restrictions to subletting your space. Subleasing often sets up a competition with the landlord so many leases prohibit you from approaching anyone the landlord has negotiated with during the past six months, for example. Other lease clauses can affect the process for alterations or the need to remove them upon expiration of the lease.

Lastly, an important option to negotiate involves a right to renew. This protects your space upon expiration of the lease and ensures you aren’t booted out in favor of a larger or higher paying tenant.

In sum, down markets offer a lot of opportunities for both price and favorable lease clauses.

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