Stamford Advocate

Property Rounds: Greenwich ripple effect in offing?

By: Alexander Soule

It was a tale of two Connecticut office buildings in the past month, with a former Royal Bank of Scotland building achieving nearly full occupancy with a pair of new leases, and Stamford's mammoth UBS building finally landing an initial tenant after the Swiss bank's move across the street into what is now RBS' main office in Connecticut.

Both buildings could be a prologue of things to come in commercial real estate, with ramifications for the rest of southwestern Connecticut.

Heading into the second half of the year in Greenwich, 10 office buildings have filled their major blocks of available space measuring 10,000 square feet or more, according to an updated report by Choyce Peterson. The Norwalk firm publishes posters semiannually that depict occupancies of Fairfield County buildings on a floor-by-floor basis, providing a snapshot in time of changes from six months earlier.

That amounts to 40 percent of the office buildings in Greenwich tracked by Choyce Peterson, a significant milestone, according to the firm's principal John Hannigan.

"It's stunning to me - remarkable - that 10 buildings of the 24 we surveyed on the poster have no direct space from the landlords available, "Hannigan said. "We've known for 6 to 12 months that Greenwich has been tightening, but that statistic is ... significant. If we are bringing tenants around, already 40 percent of the Class A larger building market can't handle the requirement directly, with some spot sublease space available."

At 600 Steamboat Road in Greenwich, 40,000 square feet of space was snapped up in the second quarter by Eagle Point Credit and Eldridge Industries, the former relocating from 20 Horseneck Lane and the latter expanding into additional space. Only a small block of space remains available at the one time RBS Greenwich Capital headquarters on Greenwich Harbor, with lease rates among the highest in Connecticut.

Runway to do deals

Stamford hit its own milestone this month, with the revelation of KPMG as the initial tenant at the former UBS building at 677 Washington Blvd., purchased last year by a California investor for $33 million. KPMG is relocating an existing office located at the 3001 Summer building it shares with Pitney Bowes and other firms, opening up more than 30,000 square feet of additional space there.

"For years, one of the first questions that our clients asked us was: "What's going on with the UBS building in Stamford?" Hannigan said. "It's terrific news for Stamford, Fairfield County and the state of Connecticut that that building is now open for business. ... There is a positive feeling going on in Stamford that there is some momentum, that things are happening with companies coming in and some expanding."

But the Stamford market remains dogged by the large majority of big buildings remaining available including Silicon Harbor and Shippan Landingon the waterfront; the UBS building and the nearby 400 Atlantic St. downtown; and former General Electric buildings on High Ridge Road and Long Ridge Road that combined total nearly a half-million square feet of space.

In Norwalk, FactSet's big new lease in The Towers complex creates a domino-effect opening at its current headquarters in the Merritt 7 Corporate Park, where FactSet will remain through the end of 2019 until its new lease commences.

"With the January 2020 availability, they do have a nice runway to show the space and do deals ahead of FactSet leaving," Hannigan said. "They'll lease a substantial portion of that in the next year. ... Merritt 7 has been well, well occupied and has had limited availability the last couple of years."

Needing a ripple effect

While Danbury has benefited from Praxair's commitment to maintaining executive offices there after completing a planned merger with rival Linde, the city remains hobbled with the ongoing malaise at Praxair's former home at Matrix Center. Brokers are in agreement that the hulking former Union Carbide headquarters needs to be converted to new uses, a major challenge given the residual value remaining in the structure against the cost of renovations and an uncertain future appeal for any repurposing.

Still, Danbury benefited in the second quarter from among the larger deals in Fairfield County in the second quarter with Owl Cyber Defense Solutions securing more than 30,000 square feet of space at 42 Old RidgeburyRoad, as reported by the Stamford office of Cushman and Wakefield of Connecticut, with Owl Cyber Defense located currently at 38 Grove St. in Ridgefield.

Take the Matrix building out of the equation, and the Danbury market is otherwise healthy, Hannigan said. In eastern Fairfield County, Shelton office buildings owned by R.D. Scinto are largely near capacity, even as Trumbull struggles with significant vacancies the result of downsizing at Unilever and other corporate moves.

"What we need is that ripple effect to go from Greenwich to Stamford and Norwalk," Hannigan said. "From a tenant's perspective, that means you can drive more aggressive deal terms and you have more choices ... to look at."