Property Rounds: Area unlikely to see office-building boom – The Advocate

Photo: Brian A. Pounds / ST

The office building at 1000 Lafayette Blvd. in Bridgeport.

The office building at 1000 Lafayette Blvd. in Bridgeport.

The commercial building at 112 Quarry Road, in Trumbull.

The commercial building at 112 Quarry Road, in Trumbull.

Stamford, Conn. on Monday, Feb. 27, 2017.

Stamford, Conn. on Monday, Feb. 27, 2017.

Stamford, Conn. on Monday, Feb. 27, 2017.

Stamford, Conn. on Monday, Feb. 27, 2017.

Stamford, Conn. on Monday, Feb. 27, 2017.

Stamford, Conn. on Monday, Feb. 27, 2017.

Stamford, Conn. on Monday, Feb. 27, 2017.

Stamford, Conn. on Monday, Feb. 27, 2017.

Property Rounds: Area unlikely to see office-building boom

Area workers dont have to look beyond the buildings they see every day to envision the future of local office space. The landscape probably wont change much in the next few years.

Almost eight years after the end of the last recession, the region still grapples with swathes of vacancies. Given the persistence of the empty spaces, developers and realtors are focused on filling those gaps, while expanding the office inventory represents a longer-term proposition.

My view is that the office market does not justify new construction at the moment, said Jim Fagan, Stamford-based market leader for commercial real estate firm Cushman & Wakefield. Its very soft. But were starting to see a demographic shift in the population, which could cause the office market to become vibrant and healthy again.

Lots of capacity

Fairfield County posted a 24.2 percent vacancy rate in the fourth quarter of 2016, compared with 21.5 percent during the same period in 2015, according to data from commercial real estate firm Newmark Grubb Knight Frank.

In Norwalk, the figurative line in the dirt on new office construction was drawn in 2013, after Spinnaker Real Estate Partners abandoned its long-standing 95/7 proposal to build an office complex totaling 600,000 square feet at the intersection of Interstate 95 and Route 7. Spinnaker sold the property to General Growth Properties, with GGP moving ahead with plans for an upscale mall for the site.

More recently, the former headquarters of U.S. Surgical was demolished to make way for the Grist Mill Village apartments of developer Building and Land Technology. BLT chose to invest in a residential project rather than new offices despite its success with The Towers complex just down Glover Avenue, which General Electric last year made the center of its operations in southwestern Connecticut.

In northern Fairfield County, major office properties have experienced mixed fortunes. Lee Farm Corporate Park, with five floors and 216,000 square feet, is full. Building owner Felix Charney, of Summit Development, said he has to turn away companies.

There is positive activity in the area, Charney said. We have buildings all over Fairfield County, New Haven County and Hartford, and the overall leasing market is slow. But in certain spots the leasing is up. Its very local. It depends where your buildings are.

Danburys Matrix Corporate Center looms as a 1.2 million-square-foot behemoth with huge tracts of vacant space. It is undergoing foreclosure proceedings, adding to questions surrounding the future of the property.

The Matrix was rattled by the recent departures of large tenants Praxair and Boehringer Ingelheim. But it scored a win when transportation company Odyssey recently signed a 10-year extension.

Growth potential?

Developers have shown little interest in building new office developments in the area anytime soon.

We have no regrets about not proceeding with (the 95/7) office project, Spinnaker CEO Clay Fowler said in an email. Although the older buildings have maintained high occupancy, our cost basis on a new office at 95/7 would have been significantly higher 30 (percent) or more thereby putting us in an untenable market position in a weak market largely dominated then and still today by small tenants.

In Greenwich, the office market has fared better than its neighbors. But even with a vacancy rate of about 10 percent, the inventory likely will not expand by much soon.

Few new companies are moving in, and few are looking to increase in their size and space,said Ron Brien, of Alliance Commercial Property.

Meanwhile, the owners of some of Greenwichs most desirable office spaces are working to maintain their grasp on the market by investing in renovations and updates. The Pickwick Plaza at the top of Greenwich Avenue is undergoing the final stages of overhauls of its lobbies, restrooms and corridors, according to Marilyn Cafone, of Kensico Properties, which owns the property.

In Stamford, BLT owns a 14-acre peninsula off Bateman Way in the South End. On that site, hedge fund Bridgewater Associates proposed several years ago a new headquarters. It would later scrap that plan after it attracted intense opposition.

BLT officials have not said how they plan to develop the peninsula. They were not available to comment for this article.

An influx of millennials could eventually increase the local workforce and fuel demand for more office space, said Cushman & Wakefield. That trend is already underway in growing cities such as Stamford, Norwalk and Danbury. Fagan said he expects the migration to accelerate.

Youre going to see these millennials streaming out of the cities into the suburbs, and our market will be the beneficiary of that population shift, Fagan said. As they start having kids, theyre going to move to the suburbs.

Macaela Bennett, Chris Bosak and Alexander Soule contributed reporting to this article.

pschott@scni.com; 203-964-2236; twitter: @paulschott

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Property Rounds: Area unlikely to see office-building boom - The Advocate