The Greenwich American Center at One American Lane in Greenwich is currently home to a number of hedge fund advisors, including Paloma Partners, Amaranth Advisors and Andor Capital Management.
Despite the influx of hedge fund firms that have been streaming into Greenwich recently, Fairfield County is showing only minor activity in the commercial real estate realm, creating an environment that highly favors the commercial tenant.
Greenwich has often been the top performer in the county, earning much higher rents and becoming much more than just a bedroom community for wealthy Wall Street types. Firms that once saw only Manhattan as the place to hang their shingle now view Greenwich – and a select few other parts of Fairfield County – as a viable alternative to having a New York City address.
“Hedge funds are really keeping us busy right now in Greenwich,” said Steven Greenbush, managing director of Insignia/ESG, headquartered in Stamford. Insignia/ESG is currently working to ink two 100,000-square-foot lease deals with a couple of hedge fund groups, he said.
Both firms are currently located in the Greenwich American Center and are looking for more space. Paloma Partners and Amaranth Advisors both are seeking to remain in the Greenwich area, Greenbush said, with the latter looking to greatly expand from its current 20,000-square-foot home to 100,000 square feet of space. Paloma, meanwhile, is expected to stay within the 100,000-square-foot to 120,000-square-foot range.
“They’re both actively looking in the market right now,” said Greenbush, noting that Andor Capital Management has recently leased space in the Greenwich American Center.
“We’re seeing a lot of smaller hedge funds coming out of New York. I think people are realizing that Greenwich is now a very respectable address to do business from. I’ve heard Greenwich and Westport referred to as hedge fund heaven these days, and since a lot of the managers already live up here they decide they can do business just as well up here than they can by commuting to Wall Street. They can attract clients to Greenwich just as easily as anywhere else.”
Greenbush said that hedge funds appear to be the only industry players keeping the Fairfield County market floating. While some industry insiders predict the market is due to go down, Greenbush believes hedge funds are one of the only investment sectors making money right now.
“They’re still making money so they’ll still need additional office space,” he said.
The market, while better than it has been lately, is still not as good as it could be, says Greenbush, and it’s not because of the summer weather.
“During the next couple of weeks there’s always going to be a slowdown. Presidents, chairmen, and CEOs make the decisions on these deals, and a lot of them are vacationing over the summer. That might normally slow things down, but this year it’s not so much the summer weather but the economy we’re in. The commercial real estate market is a function of the economy, and right now our economy just isn’t going to support more office space,” he said.
‘More Concessions’
Aside from hedge fund activity, the overall market in Fairfield County is relatively slow. There is activity in the works, but companies appear to be taking longer to make their decisions and those decisions tend to be relatively small in scale. While major deals are few and far between there are a handful of 5,000- to 10,000-square-foot potential tenants that are that are in the market, driving aggressive rates from landlords.
“This is definitely a tenants’ market,” said Greenbush. Landlords are trying to push tenants into early renewals, but “sophisticated tenants” know that now is the time to lock in a long term for inexpensive rents, he said.
“Landlords think that the market will come up in two or three years, but smart tenants know that they should lock down for the long term now,” he said, adding that landlords are forced to comply or lose the tenants altogether.
“The market right now is very much tenant-based, and tenants are pitting landlords against each other,” said Greenbush. “There is a lot of space to go around, and still a glut of sublease space on the market. Sub-landlords are competing against landlords, and we keep seeing more sublease space come on the market. We think that activity is leveling off. There are landlords in downtown Stamford that have large blocks of available space and they’re stating to be more aggressive.”
Right now, average asking rates are at $42.87 per square foot in Greenwich and $31.35 in the Stamford’s central business district.
“Those are just the asking rents, but that’s not what the landlords are getting,” said Greenbush. “Some landlords are holding steady on the asking rents, but we’ll do more negotiating and get down lower, get more concessions and more free rents.”
He noted that in some cases landlords are assuming lease obligations at other buildings just get tenants to move earlier.
One of the issues in Stamford exacerbating the depressed market is that tenants aren’t thinking about expansion, even with favorable lease rates available.
“You’re not seeing the growth. The only tenants in the market are those whose leases are expiring, so we’re not seeing the local growth due to companies hiring more people,” said Greenbush. “There are plenty of tenants in the area. We only lost a few during the dot-com crush, so we haven’t seen too many tenants vacate the area and they’re still happy doing business in Fairfield County. But, we’re really seeing companies downsizing as opposed to expanding.”
