Northeast Real Estate Business

NOV-DEC 2015

Northeast Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Northeast United States.

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Page 38 of 64

38 • November/December 2015 • Northeast Real Estate Business O F F I C E S N A P S H O T: C O N N E C T I C U T The Stamford, Connecticut, offce market has everything going for it: proximity to New York City, a good transportation system, a wonderful quality of life, a superior public school network, great recreational possibili- ties being on Long Island Sound and great professionals. The one negative: almost zero growth in the state for the past 25 years in terms of both popula- tion and offce-using jobs. This lack of growth has led to a very soft economic climate as it relates to offce space. The vacancy rate for class A offce space has hovered at more than 20 percent for the last seven years or more and has dipped below that only a few times since 1990. Vacancy Rate Favors Tenants In Fairfeld County, the point of equilibrium is an offce vacancy rate of approximately 15 percent. In other words, when the vacancy rate is 15 percent, neither landlords nor tenants have the upper hand in the negotia- tion of a lease transaction. In Stamford, the current vacancy rate resides at just over 23 percent — and that gives sig- nifcant negotiating leverage to ten- ants that are looking for space. Interestingly enough, landlords of some of the better Class A institution- al buildings are willing, and able, to hold rents at high rents in the $48- to $58-per-square-foot range. Their at- titude is that the best tenants should and will pay for quality space, while the balance of buildings compete tooth and nail for tenants at rental rates ranges between $22 and $32 per square foot. Landlord Concessions For tenants, moving can be an ex- pensive proposition. Expenses can in- clude the cost of the move, the acquisi- tion of all new offce furniture, and an upgrade of IT infrastructure. In order to incentivize tenants to move to their space, landlords in the Stamford mar- ketplace generally offer free rent and a tenant improvement allowance. Generally speaking, tenants can expect to receive slightly more than one month of free rent for each year of lease term. For example, if a tenant were to commit to a 10-year lease, the company would receive between 10 months and one year of free rent from the landlord. Similarly, tenants can expect to re- ceive a tenant improvement allow- ance of about 10 percent to 15 percent of their rental rate per year of tenancy. So if a tenant were to sign a lease for 10 years starting at a rent of $45 per square foot, the company could ex- pect a tenant improvement allowance contribution from the landlord in the neighborhood of $45 to $65 per square foot. Hot Topics on Tenants' Minds Two trends dominate the conversa- tion in the local offce market: densi- fcation and transportation-oriented developments (TODs). Today's tenants are consolidating more people into less space. While it wasn't uncommon to have three people per 1,000 square feet not too long ago, tenants often aim to get fve or six people into the same amount of today. In addition to further reducing demand for space, densifcation also causes infrastructure problems: cool- ing a space that has 50 percent more people and equipment can be chal- lenging, and parking those employ- ees when most buildings provide less than three parking spaces per 1,000 square feet causes jammed lots and of- ten forces landlords to consider solu- tions such as valet or tight-pack park- ing in order to solve for the increase in tenant density. Developments adjacent to mass transit facilities are highly desired by municipalities, developers, and ten- ants alike. Municipalities are highly in favor of TODs as they allow for more dense projects while lessening poten- tial traffc congestion. Developers like TODs because they can build more densely while providing for less park- ing. Tenants like TODs as they open up their employee pool to a much wider audience. It is much more pal- atable to have employees commute from Manhattan to Stamford if those employees can walk (or take a short shuttle) from the train station to their offce. In short, the Stamford offce mar- ket is a vibrant place to do business, and tenants can provide a vast array of amenities to their employees, in ad- dition to promoting work-life balance by making it feasible for employees to take an hour off for a child's concert or athletic event and get back to work for the balance of the day. All of this comes at a price that favors tenants and a location that is a short train ride from Manhattan. In Stamford, the current vacancy rate is just over 23 percent — and that gives signifcant negotiating leverage to tenants that are looking for space. Jim Fagan Cushman & Wakefeld Market Leader, Connecticut & Westchester TENANTS HAVE THE UPPER HAND IN STAMFORD OFFICE MARKET have your business escape to Red Bank • Named the 3rd Best Small Town in America by Smithsonian Magazine • Ranked #2 in best towns in NJ to open a business by Nerd Wallet • Voted Favorite Downtown Arts District by Discover Jersey Arts • Named the People's Choice for Great Downtowns by American Planning Association – NJ Chapter • $5.8 billion in retail demand for consumer goods & services within 10 miles • $108,800 average household income within 10 miles • 12,298 total employees in Red Bank with over 7,000 white-collar employees red bank a cool little town For more details and a list of co-tenants, call 732-842-4244 or visit us at UPCOMING EVENTS Entertainment Experience Evolution February 24-25, Los Angeles

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