Retail, office landlords adjust to tough times
Vacancies grow as stores close and companies consolidate

March 12, 2009 – By Elizabeth Kim, Staff Writer, The Advocate

On the day after Christmas -- typically one of the busiest shopping days of the year -- the lights were off at the Christian Bernard store in the Stamford Town Center.

The New Jersey-based jewelry chain had filed for bankruptcy.

The store, which sold watches and diamonds, had been at the Stamford mall for about a decade, General Manager Michael McAndrews said. But the news did not take mall executives by surprise. [Choyce Peterson coverage highlighted in yellow in the Read More section.] 

"We can expect to see some store closings based on lower sales expectations," McAndrews said. The recent holiday shopping season was one of the worst in decades, according to SpendingPulse, a research report by MasterCard.

In January, state Attorney General Richard Blumenthal ordered the stores be temporarily reopened so consumers could collect items left for repair, on deposit or on layaway.

McAndrews said the mall does not release vacancy rates but said Christian Bernard was one of two stores to shutter its doors after the holiday.

At Danbury Fair Mall, the only unanticipated closing was that of KB Toys, which declared bankruptcy in December, said Maura Ruby, senior property manager.

"This is a challenging economic time," Ruby said. "We try to manage through smart ways to sustain and develop promotion."

One of those ways has been through temporary leasing that gives retailers a short-term run at a mall with an option to become permanent.

Education Works, a little-known retailer that sells educational products, has agreed to temporarily lease the space vacated by KB Toys until a permanent tenant is found, Ruby said. Education Works could decide to stay in the mall and sign a long-term lease, she said.

"If we have a retailer that we feel will add to the property experience, we will try to work with the retailer and make them come to the center," Ruby said.

Westfield Shoppingtown Trumbull also lost KB Toys as a result of its bankruptcy. Last summer, affordable clothing chain Steve & Barry's left the mall for the same reason.

But Lee Sterling, Westfield's regional marketing director, called the unanticipated closings "normal turnover." She said the mall saw several new additions in the fourth quarter of last year, Target being the most important.

"We have a much longer view," she said. "Ongoing reinvestment in our center allow us to prosper in good times and withstand economic challenges."

As retail closings and company consolidations become more widespread across the nation, real estate brokers are seeing an increase in commercial vacancies that are leading to falling rents.

"The tide has turned, and it's absolutely a tenants' market," said John Hannigan, co-owner of Choyce Peterson, a commercial brokerage firm in Fairfield County and Westchester County, N.Y.

Hannigan specializes in the office market, which has slowed considerably. The Fairfield County office market ended the year with the lowest level of leasing activity for Class A space since 2001, according to Cushman & Wakefield.

Countywide, the vacancy rate of office space is about 15 percent, up about 2 percent from last year. Danbury saw the highest office availability rate with 21 percent. Stamford was second highest with 18 percent. In Greenwich, which has had the most expensive rents in the region, the vacancy rate spiked from 6 percent in 2007 to 11 percent at the end of 2008.

"Clearly, we've been hearing from people that commercial real estate has not been immune. It's a business that's really fueled by employment," said Lisa Mercurio, a spokeswoman for the Business Council of Fairfield County.

In Fairfield County, the number of office employees dropped 1 percent from 2007 and is expected to fall another 3 percent in 2009, according to Cushman & Wakefield.

In Stamford, Economic Development Director Michael Freimuth said the city was starting to see more smaller-scale corporate offices.

In the past three months, Hannigan said he has worked with companies to come up with an action plan, with their office space needs based relative to market conditions.

"Because it's now a tenants' market, it now gives companies an opportunity to renew at reduced rates or to look at the new market for potential relocation that better suits their companies' needs," he said.

On the retail side, Jessica Curtis, who works in the retail services group of CB Richard Ellis, said Fairfield County is still considered a desirable market for national and local retailers.

In Darien, a Whole Foods is under construction on Ledge Road, and in Greenwich, where rents have shot up dramatically in the past few years, national retailers Cole Haan, Madewell, and Janie & Jack have all signed leases in recent months, Curtis said.

In Stamford, city officials have reported progress on the Harbor Point development in the South End. The signing of a lease by New York supermarket chain Fairway late last year for the former Yale & Towne site represented a significant coup for the developer. The proposed 55,000-square-foot store is scheduled to open early next year.

But one real estate expert gave a blunt assessment of current market conditions.

"Everything is in a holding pattern," said John Goodkind, managing principal at the Greenwich office of New York City-based Newmark Knight Frank commercial real estate. "There's no trend or any movement that you can point at."

Mercurio said, "It's cyclical, as the economy as a whole is. We're reflecting an economic cycle that is currently in a recession. But the pendulum also swings the other way."

- Staff Writer Elizabeth Kim can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or 964-2265.