Diageo PLC, which bills itself as the world’s leading premium drinks business, has signed a 15-year lease for 280,000 square feet in a new Class A office tower located in the Towers at Merritt River Corporate Campus in Norwalk. The building is scheduled for completion in 2005.
The alcoholic beverage business Diageo PLC, best known for its Guinness, Smirnoff and Captain Morgan brands, will consolidate its four Stamford offices into a 280,000-square-foot, build-to-suit tower in Norwalk that is scheduled for completion in 2005.
The firm’s decision follows months of discussions with New York and Connecticut officials and also signals a broader trend – more and more companies are leaving Stamford.
Diageo, which signed a 15-year lease, will receive $40 million in tax credits from 2007 to 2013 and will employ about 1,000 people at its new location, according to a state economic development report. The company, which also looked at opportunities in New York, found the best real estate costs and tax-credit incentives in Norwalk, according to Diageo spokesman Gary Galanis. He added that the Norwalk opportunity – at 801 and 901 Main Ave. – provided the right price, office size and incentives, a combination that was missing in Stamford.
The North American headquarters of Diageo – which bills itself as the world’s leading premium drinks business – employs about 700 people in Stamford. Founded in 1997 with the merger of Grand Metropolitan Public Ltd. and Guinness PLC, Diageo brews and markets beer and produces and sells wine; among its other products are Baileys Original Irish Cream liqueur, Johnnie Walker scotch and Tanqueray gin. Diageo’s move to the Class A office building in Norwalk will make it one of the largest corporate employer in the city. The building, located in the Towers at Merritt River Corporate Campus, also includes the regional headquarters for Hewitt Assoc., an outsourcing and consulting company.
‘Distinct Problems’
Diageo is not the first company to leave Stamford. Industry watchers say the cost of living, traffic and a lack of available space in Stamford are pushing businesses into other parts of the state. For example, GE Commercial Finance moved some of its offices to Norwalk and the chocolate and soda giant Cadbury/Schweppes left for Ryebrook, resulting in the loss of 300 Stamford jobs, according to Colin L. Reilly, vice president of CB Richard Ellis in Stamford.
“For every company it’s different but, in general, the first stop in Connecticut tends to be Stamford,” he said. “Public transportation doesn’t lend itself to business. Companies that started here tend to migrate east, where the population lives.”
Transportation is a very big issue for Stamford, particularly through the New Haven corridor, said Dannel P. Malloy, the city’s mayor.
“Businesses move out of New York to Greenwich and yes, firms move from New York to Lower Fairfield County – there are those types of trends, that’s a reality and has been for 40 years,” he said. “What we have seen is that the state has underinvested in transportation and this has caused distinct problems, specifically for Lower Fairfield County.”
According to a Fairfield County Marketview compiled by CB Richard Ellis, while Stamford is still Connecticut’s hub of financial services and business for law firms, the past two years have been difficult. The city, hit hard by the ripple effects of the 2001 terrorist attacks on the United States, has yet to recover at the same pace as Greenwich and Norwalk. Lack of relocations into the city and an inability to retain existing tenants resulted in lackluster demand and availability that reflects little except the amount of space returning to the market, the report noted.
However, CB Richard Ellis predicts that things could be looking up for Stamford in the near future – if it manages to capture a few major users. It has the room to do so; Stamford contains 34 percent of Fairfield County’s total available space, more than any other submarket. The major challenge will be filling the large blocks of available space, in a time when large transactions are increasingly rare, according to the report.
At the end of 2003, four blocks of space totaling 657,800 square feet remained available. Xerox’s decision to suspend marketing 255,000 square feet at its Long Ridge Road headquarters, along with the conversion of 121,450 square feet at 77 Havemeyer Lane to residential use, dropped that number down to two blocks, or a total of 261,850 square feet.
CB Richard Ellis said those withdrawals combined with leasing to overcome large space returns at 300 First Stamford Place and 777 Long Ridge Road, among others, to produce positive absorption totaling 55,510 square feet for the year – a significant reversal from almost 643,510 square feet of negative absorption in 2002. Overall availability in Stamford’s central business district declined 8 percent from last year to 2.7 million square feet and the availability rate decreased by a point and a half to 16.3 percent.
The average asking rent dropped $2.11 per square foot to $28.67 per square foot, according to the CB Richard Ellis report.
