Despite its obvious amenities – 45-minute train rides into New York City, modern office buildings and its reputation as a business hub in Connecticut – the city of Stamford continued on its hard-luck streak as its Class A office vacancy rates increased to 15.8 percent in the third quarter of 2004 from 14.8 percent in the second quarter, according to statistics from Stamford-based Albert B. Ashforth Inc.

The average asking price also declined from $34.34 per square foot in the second quarter to $33.90 in the third quarter, according to Ashforth. The asking price a year ago was $35.54.

The problems that have plagued the city – and the rest of lower Fairfield County – continued in the third quarter. High housing costs continue to push workers farther east, but Stamford’s biggest headache is still the gridlock of Interstate 95, the main artery that funnels traffic from New England into New York City.

“One thing that hurts us is the transportation,” said Gerard Hallock, senior vice president at Ashforth.

But the rest of Fairfield County, including some other sectors in Stamford, fared better. Leasing activity increased 4 percent to nearly 2.6 million square feet, according to statistics from CB Richard Ellis’ Stamford office. The county saw positive absorption of 287,240 square feet and availability stayed steady at 17.4 percent.

‘Nipping Away’

In Stamford, many small office deals at the Landmark Square plaza helped raise overall office leasing 31 percent from the second to the third quarter.

“[They were] just nipping away at available space there,” said Steve Greenbush, a first vice president at CB Richard Ellis in Stamford.

And, although the city has been struggling for some time, commercial brokers hope it could see a comeback sometime next year.

Stamford remains the business hub of the region, Hallock said.

“I still think Stamford is the business center of Fairfield County and maybe the state,” he said.

The city took off as a hub for financial institutions in the 1980s and 1990s. Companies started moving from New York City to escape high rents, first to Greenwich, and then to Stamford, Hallock said. Construction was taking place everywhere in Stamford and the city prospered. Companies that wanted to move there in the late 1990s couldn’t find space, Greenbush said.

But then prices started to go up. Housing became expensive, so many of the workers at those companies started moving farther east, to towns like Shelton and Trumbull, where housing was cheaper.

And when companies wanted to expand or move to different facilities, they decided to spare their employees the rush-hour headaches they were experiencing on I-95, and moved farther east. Some large companies, such as Diageo PLC and FactSet Research Systems, moved from Stamford earlier this year. Many companies move for business reasons or because of mergers and acquisitions, Hallock said.

These days, Norwalk is the new Stamford, Hallock said. Diageo and FactSet have both found new homes there.

But if Stamford’s office market is on the downside of a cycle, it’s got to come back up, Hallock noted.

“I’m betting on it,” he said.

Stamford’s – and the rest of lower Fairfield County’s – market echoes what happens in New York City’s market, he said. Things are looking up in the Big Apple, which has regained some of its luster. But prices for office space there are going up again, which means companies will soon be looking to the suburbs to save money. Most of those companies won’t consider moving as far away from the city as Shelton or Trumbull, but will look at closer at communities like Greenwich and Stamford, Hallock said. Some Greenwich companies also might start looking at Stamford to save on rents, according to Greenbush.

“I believe it’s got to come back,” Greenbush said.

Stamford also has many amenities, he said. The city has train stations, apartments, government buildings, nightlife and other benefits that can support businesses and their employees.

“We have the infrastructure here,” Greenbush said.

Some of Stamford’s businesses – those that occupy 20,000 to 30,000 square feet – are on the market for new offices, Greenbush said. But he believes they will choose to stay in the city. Greenbush also said he hopes that by late next year or early in 2006, more companies will be coming into Stamford.

“Things seem to be picking up,” Hallock added.

The past few weeks have been encouraging for commercial real estate in Stamford, according to a release from CB Richard Ellis.

“We’ve seen an increase in the number of tenants looking for space in Stamford over the past few weeks and expect an uptick in leasing velocity in the fourth quarter,” said Robert Caruso, managing direct of CB Richard Ellis’ Westchester/Fairfield office, in a prepared statement. “While we don’t expect this improved activity to have a huge impact on the city’s availability, it may signal the beginnings of better tidings for Stamford and the rest of Fairfield County going forward.”

Overall, Fairfield County saw increasing activity in commercial leasing. Companies demonstrated increased confidence and committed to leases during the third quarter, according to the report from CB Richard Ellis.

“Companies felt more comfortable signing new leases during [the first three quarters of the year], especially larger corporations that had surfed the market for a long time looking for just the right deal,” according to the report.

The increased confidence was due in part to the stronger economy, but many companies had to “pull the trigger” and sign a lease because they had been looking for a long time, Greenbush said.

Greenbush and Hallock both expressed hope that the market will improve soon.

“It’s going to get better,” Hallock said, adding that he doesn’t expect prices to increase until the vacancy rate gets below 15 percent.

The fourth quarter should see positive absorption and steady rental rates, Greenbush said.

“I think the rest of this quarter will be strong,” he said.

That strength is already evident in the central region of the county, where Norwalk benefited from companies moving up from Stamford. The town gained several new businesses in the third quarter, including Belvoir Publications and Octagon Marketing, boosting leasing 15 percent from the second quarter to 190,340 square feet. The region’s velocity increased 1 percent from 2003, because the current high level of activity began around this time last year, according to CB Richard Ellis’ report.

Eastern Fairfield County’s activity reflected the state of the national and local economies, according to the report.

“For that reason, as the overall economic situation began to improve, the east has seen a corresponding improvement in its fortunes over the past nine months,” the report states.

Leasing increased 14 percent from the same period of last year to 431,150 square feet, or 17 percent of the county’s overall total so far this year. There also were few space returns that did not come directly from landlords, according to the report.

The strong leasing that the northern region of Fairfield County saw during the first half of the year continued during the third quarter, according to the report. The level of leasing so far this year exceeded 2003’s totals by 127 percent. Activity from tenants such as Ability Beyond Disability, Cendant Mobility and GE Capital buoyed the results.

Greenwich’s leasing increased 358 percent from the second quarter and the town saw three of the county’s largest deals in the third quarter, including Paloma Partners’ 105,630-square-foot commitment at the Greenwich American Center.

Several major spaces also returned to the market. Ziff Bros. returned 58,120 square feet to the market after a first-class build-out of its space at 55 Railroad Ave., according to CB Richard Ellis’ report.