GE Commercial Finance leased the 221,000 square feet at 201 Merritt 7 in Norwalk last year.

Transportation and traffic issues in Fairfield County pushed many businesses eastward in 2003, creating a booming year for commercial real estate in Norwalk, but leaving activity lagging in Stamford. The western portion of the Fairfield County market saw about 380,000 square feet more rented in 2003 than in 2002, according to a year-end report from CB Richard Ellis.

Norwalk saw much of the leasing activity and several large deals in 2003, making it “the place to be in Fairfield in the new millennium – as Stamford was in the 1990s,” the report states.

“In a market where a lot of space was returned [to the market by tenants], Norwalk saw positive absorption,” said CB Richard Ellis First Vice President David Block.

Leasing activity was also strong in Greenwich, he added.

“It was a banner year in Norwalk and Greenwich.” Block said.

Stamford saw a slightly better year than in 2002, when it had negative net absorption. The city’s net absorption rate was slightly on the positive side this year, according to the CB Richard Ellis statistics. But Stamford is still lagging behind the western market, partly because of migration east, Block said. Many businesses are moving because of traffic on Interstate 95 and because many of their employees live in the more affordable eastern cities and towns. Because Norwalk is on the Route 7 corridor, employees who commute there from the north and east often have shorter rides, said George Walker, senior vice president at Albert B. Ashforth Inc.

“Companies [that move to Norwalk] are serving the needs of employees in terms of commuting,” he said.

Stamford saw 14,499 square feet of office space leased in the fourth quarter of 2003, according to statistics from Albert B. Ashforth Inc.

“Things are a little tough in Stamford,” Block said.

But Stamford’s neighbor to the east, Greenwich, hasn’t been affected by the trend of Lower Fairfield County businesses moving farther east, Block said.

“The one caveat [to that trend] is Greenwich,” he said.

A number of hedge fund management companies and other financial services companies are taking up space in that community. Greenwich can experience the same kind of traffic and commuting woes as Stamford, but many companies that lease office space in the center of the city are willing to pay high prices to be in the area. The city has kept its healthy commercial real estate market all through the tough financial times many other communities experienced after the terrorist attacks of Sept. 11, 2001.

“Greenwich is extremely resilient,” Walker said.

‘Hot as a Pistol’

Most of the biggest lease transactions last year took place in Norwalk and Greenwich.

GE Commercial Finance rented the 221,000-square-foot building at 201 Merritt 7 in Norwalk, the Amaranth Group leased the 123,074 square-foot space at Greenwich American Center in Greenwich, Graham Capital Management leased the 105,270-square-foot space at 40 Highland Ave. in the Rowayton section of Norwalk, Gibbs College Norwalk leased 64,545 square feet at 10 Norden Place in Norwalk, Ziff Brothers Investments leased 61,177 square feet at 55 Railroad Ave. in Greenwich and Tauck World Discovery leased 42,700 square feet at 10 Norden Place in Norwalk.

Also in the western submarket, Advance Publications leased 45,636 square feet at 20 Westport Road in Wilton.

Businesses leased about 600,000 square feet of Class A office space in the central portion of Fairfield County, which includes Norwalk, in the fourth quarter of last year and about 200,000 square feet of Class B office space, according to the Albert B. Ashforth statistics.

In Stamford, businesses leased about 500,000 square feet of Class A space and about 100,000 square feet of Class B space.

This year might be the same for those communities. Already, the alcoholic beverage business Diageo PLC is moving there from Lower Fairfield County.

Although Stamford seems to be affected by its location, Westchester County in New York, to the west of Greenwich, is booming despite the traffic concerns that are keeping businesses away from Stamford.

“[Westchester is] hot as a pistol right now,” Block said.

Large blocks of space have been taken up there, he said.

“You’re seeing migration from New York City and local expansion,” Block said.

The lackluster leasing year in some parts of the county mean that tenants throughout Fairfield County are taking advantage of the softer market.

“In a market like this, there’s always a flight to quality,” Block said.

Tenants are getting more amenities that they otherwise wouldn’t be able to afford, such as covered parking, and offices in corporate settings that have amenities like cafeterias.

Both Block and Walker hope Stamford can bounce back.

“Stamford is still our central business district in Fairfield County,” Walker said.

There are about 15 million square feet of space in the market and the city remains a destination for companies leaving Manhattan, Walker said. Few companies that move to Connecticut from there look anywhere else but Stamford, partly because those companies rely on the trains that run between there and New York City.

“That has been a second-generation move,” Walker said. “I think Stamford will do fine, long-term.”

Block agreed.

“I’m hoping Stamford has an uphike in activity,” he said.

Because the cities and towns in Fairfield County are the headquarters for so many hedge funds and financial services companies, the stock market plays a large part in whether the commercial real estate market will thrive, Walker said.

Brokers at Albert B. Ashforth have noticed a slight downturn in the first quarter of 2004 with the stock market pulling back and terrorist attacks taking place in Europe and around the world, Walker said.