Stamford’s residential real estate market is booming. Its commercial sector? Not so much
IIt’s hardly new to say that the Stamford property market continues to boom despite the pandemic.
But while the residential sector continues to explode – Stamford’s apartment occupancy is “off the charts” at around 97%, the city’s director of economic development Thomas Madden said recently – the office space is a little less resilient.
“The housing market is on fire,” affirmed Bob Miller, senior managing director of Colliers International Group. “Unfortunately, in a good economy, the commercial market tends to lag behind by six, nine, or even twelve months.”
In Collier’s most recent snapshot of the Fairfield County commercial market, the availability rate climbs from 24% in the fourth quarter of 2019 to 25.3% in the third quarter of 2020 to 25.4% in the fourth quarter of last year.
Perhaps surprisingly, the numbers are even more ominous for Stamford. Availability in the city’s central business district (CBD) rose from 25.4% in the fourth quarter of 2019 to 29.5% in the third quarter of 2020 to 30.6% in the fourth quarter of 2020. The non-central business district has more or less kept pace and rose from 29.5% in the fourth quarter of 2019 to 32% in the third quarter of 2020 before falling back to 30.3% in the fourth quarter of 2020.
The 25.4% availability of the CBD is the highest ever recorded, according to Miller – and would have been even higher if it hadn’t been for Nuvance Health’s 220,000-square-foot lease at The Summit at Danbury, which ended December 20 signed, the largest in the state was 2020 office contract.
“The same thing happened with WWE in 2019,” said Colliers Associate Tim Johnson, referring to the signing of a 16½-year lease for the 415,000-square-foot, three-building complex at 677 Washington Blvd. “You take that out and take Nuvance out of last year and the picture looks a lot less rosy.”
Even without that calculation, total 2020 leasing activity in the fourth quarter of 2020 was 711,780 square feet – compared to 861,984 square feet in the fourth quarter of 2019. Stamford’s CBD fell from 314,634 to 191,972 square feet and its NCBD from 110,304 feet to 24,758 square feet in the same period.
“It’s no secret that 2020 was a terrible year for a lot of people,” Miller said. “The economic effects were very serious. And this is where the 800-pound gorilla in the room comes in. “
The gorilla is of course Covid-19. Despite optimism that vaccination numbers will continue to rise, companies are still trying to figure out what the future will be, whether a pandemic or no pandemic.
“It’s not about if, but when the pandemic is behind us,” said Johnson. “A lot of companies look at what they know and what they don’t know and try to be light-footed and keep their balance sheets healthy.”
“Only when companies and their employees come back will we get a good feel for what the world might be like after Covid,” Miller added. “How many people will work from home every day, how many will be flexible and how many will be in the office every day is still open.”
He cited a Fortune poll last fall in which 76% of 171 CEOs said their company would need less office space going forward. A Fortune poll in February found that only 4% of CEOs plan on adding office space.
While some smaller companies make or make such decisions, Johnson said, “A lot of larger employers haven’t gotten there yet.”
Combined with the oversized, distorting effect of the Nuvance and WWE deals, “we need a lot of 5,000 and 10,000 square feet deals” to get the office going again, Johnson said.
Miller – who earlier thought “it feels like the ninth inning” with Covid vaccines on the rise – compared the situation to the approach of the two New York baseball teams to winning games. “I’m a Yankees fan so I love the Grand Slam home run,” he said. “But with the Mets you get a lot of singles and walks.” Which strategy is better depends on the situation, he said.
Even so, Miller said, there are some “green shoots” in Stamford. Colliers has been named the exclusive leasing agent for two Class A office towers in downtown Stamford. The properties – 300 Atlantic St. and 177 Broad St. – are an integral part of RFR Realty’s Stamford portfolio. Miller, Jonson and Colliers President Ted Koltis takes care of the nearly 500,000 square foot task.
300 Atlantic is a 295,000 square foot property near Stamford train station and I-95, while 177 Broad is a 200,000 square foot office building near Stamford town center and the city’s bustling arts and entertainment district.
With all the uncertainty about the future of the commercial real estate sector, Miller said, “Stamford has been a real mecca for high-end businesses in the region and state for some time. And once the companies dig deeper into our offerings, we’re likely to see more growth here. “