Experts predict that the city of Stamford needs to market itself more aggressively in 2003 in order to retain such businesses as XL Reinsurance America, which recently leased 40,570 square feet at 333 Ludlow St. in Stamford Harbor Park.

Reflecting back on a lackluster 2002, experts are predicting stability in Fairfield County’s more resilient office markets, and a need for significant change in some of the more struggling areas.

Dean Shapiro, executive director of Insignia/ESG in Stamford, has been preparing for his company’s annual State of the Market breakfast, which will be held on April 4. While doing so, Shapiro paused to take the temperature of the office market in Fairfield County during the first quarter of 2003.

“Last year, for the most part, was pretty lackluster with the exception of Greenwich,” he said. “Going market by market, Greenwich will continue to strengthen because the nature of demand there is very resilient, and migration is strong from New York. The market is not only resilient, but it is potentially even counter-cyclical, making it a market unto itself.”

In Fairfield County, Stamford has the furthest to go in terms of its office market. Shapiro noted that the past year has brought some “pretty crushing issues on the supply side,” while there isn’t enough demand to “pick up the slack.”

Shapiro said, “Stamford is in a part of their evolution where they need to redefine themselves.”

A major issue in the port city is transportation. Much of the affordable labor force is based in the eastern section of the county, so with Stamford situated on the western end it’s hard for workers to commute.

“That isn’t an issue for Greenwich, which is farther west, because they don’t have to draw from the same labor market,” said Shapiro. “I also think Stamford needs to define what’s attractive about itself for companies. It needs to market itself, highlighting all the great things it has, which is a lot of culture, a great school system, it’s one of the safest cities of its size and it’s certainly one of the wealthiest. The city really needs a concerted economic development initiative or it’ll get run over.”

In other areas of the county, Norwalk, Wilton and Westport appear to be showing signs of life either through expansion of local tenants or potential migration from other points west.

Shelton and Trumbull are also fairly resilient, showcasing a diverse market without a lot of industry concentration. Both beneficiaries of eastern migration, the area should continue to improve if the general economy turns around, according to Shapiro.

Bobbing Along

Gerard Hallock, senior vice president of Albert B Ashforth Inc., was hesitant to make predictions for the coming year. However, he said the “general feeling is that the market has gotten a little better, but there hasn’t been as much new space dumped on the market as there was last year.”

Hallock’s company mainly tracks Class A buildings, which typically drive the high-end market. He said Class A space has seen a steady increase in vacancy since the same time last year.

“There’s many reasons for this, and maybe it’s just that the guy got a better deal down the street and left the space. Vacancy is increasing for a variety of reasons … economy, downsizing of companies and mergers and acquisitions have caused a bunch of it,” said Hallock.

The numbers can be deceiving, however. If, for example, a company pulled out of 200,000 square feet in Stamford, but relocated to 300,000 square feet in Shelton, the overall absorption for the county would be positive, but it would reflect negative absorption in Stamford.

The vacancy rate for Class A office buildings in Fairfield County has increased from 16.5 percent in the third quarter of last year to 17.5 percent in the fourth quarter. According to Albert B. Ashforth, at the end of the fourth quarter, there were 5.95 million square feet of Class A space available vs. 5.61 million square feet at the end of the third quarter. That compares to a 12.9 percent vacancy rate and 4.31 million available square feet at the end of 2001.

As far as leasing is concerned, 261,336 square feet of Class A space was leased or taken off the Fairfield County market in the fourth quarter vs. 382,135 square feet in the previous quarter and 508,958 square feet during the fourth quarter of 2001. Fourth-quarter asking rents in fourth quarter of last year averaged $30.66 per square foot, down slightly from the third quarter’s $31.19 average and the $32.43 average at the end of 2001.

In Stamford, the Class A vacancy rate increased to 14.9 percent in the fourth quarter from 14.2 percent in the previous quarter of 2002, compared to 9.8 percent in 2001. Among Class A buildings in Stamford, 61,427 square feet of space was leased in the final quarter of 2002 compared to 118,483 square feet in the third quarter and 240,829 square feet in the fourth quarter of 2001.

There was 1.8 million square feet of Class A space available in Stamford at the end of the fourth quarter of 2002 vs. 1.71 million square feet in the previous quarter and 1.19 million square feet in 2001. The average asking price of Class A space decreased to $34.66 per square foot compared to $35.54 per square foot in the third quarter of last year and $37.02 in the fourth quarter of 2001.

Albert B. Ashforth “ended up the year with a bang,” according to Hallock, noting that several significant leases were signed in the fourth quarter of 2002. AIG Trading Group in Greenwich leased 70,000 square feet of office space in One and Two Greenwich Plaza. Viking Global Investors in Greenwich leased 36,000 square feet at 55 Railroad Ave. Deloitte and Touche USA in Westport leased 31,650 square feet at 400 Nyala Farms Road. XL Reinsurance America has leased 40,570 square feet at 333 Ludlow St. in Stamford Harbor Park.

“The market in Greenwich stayed very stable with high rents, especially in some of the key buildings like Greenwich Plaza,” said Hallock. He noted that Greenwich was something of a market anomaly, with office space earning rents in the high $60s and low $70s per square foot.

“In Stamford we’re getting rents at half that,” he said. “Greenwich just seems to be the place to be. People have the money and don’t seem to care what it costs to be there.”

As for what the rest of 2003 will look like, Hallock said, “I’d like to think we’ve bottomed out. I think that we’re just going to bob along on the bottom for a while. I don’t think any of us think it’s going to get a lot better this year, but it won’t get a lot get worse either.”