A look at the office space market in Fairfield County with Charlene O’Connell
Options abound for tenants and landlords
Charlene O’Connell is Vice President of Choyce Peterson and is responsible for business development efforts in the firm’s areas of tenant and landlord representation and investment sales in Fairfield County, Connecticut. In today’s episode, Charlene discusses the current state of office space leasing and the creative options her firm employs to attract top tenants.
Key Takeaways
The availability rate in the Greenwich, Stamford, Westport, and Norwalk office markets is the highest in 11-plus years.
Large organizations are relocating to Fairfield County, bringing hundreds of jobs.
Understanding market dynamics enables brokers, who are compensated by landlords, to save their tenant-clients’ money over the lifetime of their leases.
“Be prepared, be proactive, and be persistent.”
Biography
Charlene O’Connell is Vice President of Choyce Peterson and is responsible for business development efforts in the firm’s areas of: Tenant Representation, Landlord Representation and Investment Sales in Fairfield County.
Prior to joining Choyce Peterson, Charlene’s background included a career in commercial banking, most recently with The Bank of America, where she managed both commercial loan and cash management portfolios. A top performer, she provided creative real estate and commercial financing alternatives to private and public companies throughout Fairfield County.
Charlene brings proven success in servicing her clients and driving results. Her strong finance background makes her a solid fit in understanding real estate needs and providing solutions to our commercial tenants and landlords.
Charlene has an M.B.A. in Finance from The University of Connecticut and a Bachelor of Science in Finance from Fairfield University. When not visiting her daughters in college, she is working on her golf game or volunteering for St. Baldrick’s. She currently resides with her husband and two daughters in Fairfield, CT.
Episode Transcription
Eric Bernheim: Welcome to The Real Estate Roundup presented by FLB Law in partnership with The Greater Norwalk Chamber of Commerce. I am your host, Eric Bernheim, managing partner of FLB Law, a full-service law firm based in Westport, Connecticut. During this focus series of five podcasts, we'll be discussing current real estate trends in the greater Norwalk region. Our expert guests will discuss topics including local development projects, workforce housing, and the trends in real estate markets, including industrial, retail, office, single-family, and multifamily residential properties. Thank you for listening.
We're here today with Charlene O'Connell, Vice President Choyce Peterson based in Norwalk, Connecticut. Charlene thanks for joining us.
Charlene O'Connell: Thank you so much for having me.
Eric Bernheim: Of course. My pleasure. Can you tell us a little bit about yourself and Choyce Peterson?
Charlene O'Connell: Absolutely. I've been with Choyce Peterson nearly six years. I spent the early part of my career at the firm spearheading their marketing and operations. Now I'm on the business development side, leading efforts in tenant representation, landlord representation, and investment sales in Fairfield County. Prior to joining Choyce Peterson, I was a commercial lender with Bank of America in Stamford, Connecticut, and there I managed both commercial lending and cash management transactions and often provided real estate financing alternatives for private and public companies in Fairfield County.
Eric Bernheim: That's great. It sounds like a great experience leading into your work with Choyce Peterson. We all know that COVID has had a far-reaching impact on both commercial and residential real estate markets. Could you talk specifically about the impact that COVID had on the office market both locally and nationally?
Charlene O'Connell: Of course, as you know, COVID impacted a lot of markets over these past few months. The office market was not negated from that. It created a lot of uncertainty for companies down the path in reevaluating their workplace strategy. For some businesses, that means a need for increased flexibility, and companies that need space, but don't know what the future looks like, are not in a position to sign a 10-year lease right now. They just can't. So in general, landlords have recognized this, and they have been open to discussions around shorter-term leases. As evident on our poster, which we'll talk about, I think in a few minutes, there's a wide range of space in different sizes, price points available throughout Fairfield County.
The Norwalk market and Stamford market, landlords are being flexible with the leasing terms that they're offering. In addition, for tenants they should keep in mind, there's a lot of sub-leases on the market right now. And sub-lease options can offer discounted rents, flexible or shorter terms, and sometimes they even come completely furnished.
Eric Bernheim: Great. So you mentioned the Norwalk market and the Fairfield County market. So can you tell our listeners about the state of the market and Norwalk office leasing?
Charlene O'Connell: Sure. Both markets were impacted certainly by COVID, but most recently, CoStar is noting that office leasing is up 50% from a year ago in Norwalk, with 60 office leases completed for a total of 170,000 square feet. And some of those big names that you may have, or may have not read in the market, Frontier Communications executed a lease for 42,000 square feet at 401 Merritt 7. Ivy Rehab signed a lease for 8700 square feet at 90, Washington. And there's even been an increase in some retail activity. For example, Bev Max signed a lease at 777 Connecticut Avenue for 13,500 square feet.
Eric Bernheim: So you mentioned 401 Merritt 7 and 90 Washington, so those are two different areas in Norwalk. What makes those two areas marketable for tenants or how are you seeing tenants viewing these different locations and what are they really looking for?
Charlene O'Connell: Sure, and I think that's part of the skill set that a broker brings to a table when they're speaking with a client. We really hone in on what the client needs and those can differ completely.
[00:05:00]
Obviously, those were more retail-oriented, someone like Ivy Rehab, that's somewhat medical, needs a lot of parking. And that certainly is going to drive their location and what they look at, versus a group that's a traditional office, or maybe like a law firm that they come in and sit at their desk eight hours a day, and don't have many visitors. So bringing someone like Choyce Peterson as a broker on your side can really hone in on the market to find spaces that best meet the needs of the tenant, and then work from there in negotiating a really great lease for them.
Eric Bernheim: That's great. And then as a follow-up, can you share with our listeners an update on the Fairfield County office market?
Charlene O'Connell: In regard to recently or, certainly, again, it was hit with COVID. But there's been some exciting news as everyone has read about, there has been a ton of influx of people to the area from New York City, and whether or not or how that will drive company relocations remains to be seen. But we certainly have experienced some recent and exciting news in the area in Fairfield County, for example, the governor came out today and made a statement that Philip Morris is coming to Stamford to 677 Washington, which is the former UBS building. And so that will bring about 200 new jobs and a headquarters to Stamford, which is great.
Prior to that, there were several other companies who have indicated their move. Tomo is leasing over 13,000 square feet at 1 Harbor Point. ITT is moving from White Plains to 2 Harbor Point in Stamford, and iCapital recently announced that they're going to establish an office at Two Greenwich Plaza. So we all have to remain optimistic that that activity in lower Fairfield County will continue to work its way up north to markets like Norwalk.
Eric Bernheim: Do you see a lot of short-term leasing for companies that are normally based out of New York City or just have employees who are no longer commuting into the city where they're just trying to set up a very short-term fix until the pandemic is gone?
Charlene O'Connell: To be honest with you, I haven't really seen that yet. It's been more establishing pretty significant locations, which I would suspect for at least probably several years and not just one year. I think we're going to find once they're here that they're really going to enjoy being here, and will stay.
Eric Bernheim: Yeah, I certainly agree. I think having a lot of people and families moving out of the city and living in Connecticut, I think they're going to like not having to commute into the city. So I think more businesses are going to be looking for long-term homes here in Connecticut.
Charlene O'Connell: Yes, I just read something in an article Eric that said over 17,000 people put in for a change of address to Fairfield County in this past year.
Eric Bernheim: Wow. That’s great for Connecticut and hopefully good for the office market in Connecticut.
Charlene O'Connell: Yeah, absolutely.
Eric Bernheim: So we are seeing high vacancy rates still in office. So are you seeing any of these vacant office buildings? Are they being converted to other types of uses?
Charlene O'Connell: Yes. I think redevelopments have been a hot topic for a number of years, and I think that will most likely continue with the excess inventory that's in the market. Most recently, we have seen a couple in Fairfield County, for example, the former Melissa & Doug building at 141 Danbury Road in Wilton was purchased by two developers and they are in the process of getting approval to build I think 188 units of apartments on that site, which previously was like a 47,000 square foot flex building with office in warehouse from Melissa & Doug building.
In addition, we've seen healthcare move into our area. I feel like every corner, Hartford healthcare is making a presence in Fairfield County, and most recently in my backyard, they purchased a former Plan B burger restaurant, and they are converting it to 15,000 square feet of healthcare space for them. So those are two different uses and redevelopment and I think we're going to continue to see that.
[00:10:00]
Eric Bernheim: That’s great, to re-purpose these old buildings and maybe change the use to make it a more vibrant community like the Melissa & Doug site. Last week, there was a sale of a 30,000 square foot office building in Westport for approximately $15 million. Do you consider that as a sign that the office market is actually really strong even though there's fairly high vacancy rates?
Charlene O'Connell: Yeah, I mean, whether the market is strong remains to be seen. I mean, that's certainly exciting news, and certainly exciting for the Westport market. This particular sale may be somewhat of an anomaly, had a solid leasing tenant leasing the majority of the building, it's downtown, and it's in a tighter market, tighter as Greenwich and Westport are tighter markets in general, as far as commercial space availability. However, within Norwalk, there's been 54 commercial transactions this year, and several have been for different big development uses, such as Main Avenue where there's a new auto dealership coming in. So hopefully, it's turning the corner for all of us. And we'll continue to see these positive changes.
Eric Bernheim: Yeah, absolutely. We all hope for a positive change. You mentioned, a quality tenant was probably the driving factor in that sale. What does the landlord look at in order to consider a prospective tenant a quality tenant? What are they really looking for there?
Charlene O'Connell: Yeah, great question. I personally don't own any real estate, other than my home. I think they're looking for some comfort that the tenant can continue or fulfill their lease obligations, and hopefully even beyond the existing lease that's there. And I know, for that reason, banks as well, like seeing that sort of tendency in there when they're financing these projects. And yes, few bankers in the area have mentioned how they really like to see medicine that medical uses are going to continue for the long haul. And certainly, as we continue our aging population, there's going to be a greater need. So that's one tenant in particular that usually landlords and financing groups really are happy to see. And so if you can confirm some sort of cash flow at that level, that may drive up the price for somebody.
Eric Bernheim: Great. Are there any other noteworthy deals that you can share with us? I know you mentioned a few already, but are there any other ones that come to mind?
Charlene O'Connell: There were two big ones, 1700, East Putnam Avenue Old Greenwich was sold in the third quarter for 63 million and 40 Old Ridgefield in Danbury was sold for 27 million. So those are really big-ticket numbers. And again, exciting to see as we're coming out of COVID that there's this sort of activity going on.
Eric Bernheim: That's great. And those are both office buildings that were sold in those transactions. Sure. That's great. So, a little bit more about your company, what value does Choyce Peterson bring to your landlord clients in this very tenant-friendly market right now?
Charlene O'Connell: Yeah, absolutely. We have definitely put together a great program on the landlord representation side. And our team's mantra is be prepared, be proactive, and be persistent. And as soon as we are out there, we develop a comprehensive marketing package that goes well beyond just putting up a sign. And for every assignment, we assemble a team of brokers, research analysts, and administration. And then we start a proactive campaign. And that includes direct outreach, market outreach, news wire, and advertising, LinkedIn advertising, and advertising in all social media fronts right now, that reach and using those platforms is a great rate to reach a number of people.
We've even gone as far as to extend personal invitations to tour buildings. We've invited the Norwalk Chamber people and the mayor to tour a building that we're representing in Norwalk. And so we are pulling out all these stops, spreading the word as much as we can. And all the while we can fulfill complete transparency with the landlord. We are in constant contact with them, providing them written updates on our strategies, what our results are and what our plans are for the next period or 30 days. As a result, we've had some great success stories.
Eric Bernheim: That's great. And how important is it for landlords to provide a strong amenity package in their buildings, such as a gym or a cafeteria, or something of that sort?
[00:15:07]
Charlene O'Connell: That's definitely a good question, Eric. And it definitely is a plus to some people, but then to other companies, that may not be as big of a factor as things like parking or location to a train, or even location to a downtown. Again, that's where we would really spend time with the tenant in really honing in on what they're looking for or what their employees are looking for because certainly there is a difference between a Class A building that may offer those amenities, along with a price differential, than a smaller building, maybe in downtown Fairfield or Westport, that may not have the breadth of those amenities.
Eric Bernheim: Sure. So that's a great segue into my next question, which is, what value does Choyce Peterson bring to your tenant clients in this, again, very friendly tenant market? So how do you represent them to your fullest?
Charlene O'Connell: Sure, so on the high level, I mean, we help negotiate the leases with the landlord and kind of level the playing field with the landlord. If you think about it, if you're a tenant, and you're looking to lease 10,000 square feet at $30 a square foot, for a five-year transaction, that's a million and a half dollars. And if you're looking at space, that's $40 a square foot, that's well over $2 million. That's a big commitment that you're about to sign. And you really want to make sure that you're informed before you sign that commitment. And that's really where we come into play, we are not only going to be able to update you on market knowledge, because maybe you haven't been out in the market in five or 10 years, inform you on what's competitive out there. And also let the landlord know that you're serious and that you want a competitive deal. And so, we understand every company is unique, every client has unique needs for their space layouts, their parking, their amenities that you mentioned before. And so we uncover all those points and then go out in the market and negotiate a successful lease for them.
Eric Bernheim: What would you say to a tenant who said that I can just renew my lease with my existing landlord, and I can save money because I'll save on the broker fee? I'm sure you probably get that a lot. Can you address that?
Charlene O'Connell: We do, we get that a lot. We constantly are telling people, we will save you much more than what any sort of broker fee is to be noted, though, that the broker fee is paid by the landlord, not by the tenant. We understand that people are concerned in even ruffling their feathers with their landlord, but we've gone so far as to even guarantee our results, and guarantee that we will save you a certain percentage, or achieve certain results in return. And we'll put that in writing too. And we've been successful. And just quickly, we just worked with a tenant in Norwalk, Merritt View, and they were looking to shrink their space, we're open to staying in the building. And we were able to help them achieve that while also getting free rent, a reduced space rent. The landlord funded their alterations to their space, all the architectural fees were paid by the landlord. So the net result for our tenant was $195,000 savings per year, which turned out to be over $2 million over the life of the lease. So we can certainly help a company financially better that costs for them.
Eric Bernheim: That sounds like a great result and certainly worth talking to a broker before even renewing an existing lease. So you mentioned earlier about your Choyce Peterson poster, can you tell our listeners a little bit about that poster, some of the details on it? And then if they happen to want a copy of that, how to get a copy of it?
Charlene O'Connell: Absolutely. Yes, our posters are near and dear to our hearts. We produce it semiannually. If anyone wants one, they can reach out on our website and there's a link there to get one. We recently published in July the midyear report and we surveyed 96 primarily Class A buildings totaling 18.2 million square feet in Greenwich, Stamford, Norwalk and Westport. And at a high level, the market availability rate for these buildings increased from 29.7% to 31.7%.
[00:20:00]
This was really striking to us. It's the highest rate we've seen in the 11 and a half years that we've produced the poster. And it's the only second time in the last five years; we've seen increases in all four submarkets. And to put that in perspective, a 31.7% availability rate equates to about 5.8 million square feet of space, which is 378 football fields. So to put that in perspective, it's a lot of space. In Norwalk in particular, it was relatively the same, the availability rate increased slightly 34.5% to 36%. Again, the most notable additions of space were at 383 Main, 201 Merritt, and 401 Merritt, and there's been a couple of subleases that went on the market.
HEI put on 20,000 Square feet and Reed Exhibitions put on another 34,000 square feet. That certainly brought some pain to the Norwalk market. However, on a positive note, there's really a breadth and quality of space available in Norwalk that hasn't been there. For example, the Vermont town has 12,000 square feet of space available. If you haven't been in that building, you really need to, it really has one of a kind of amenities for that unique user. And then for someone looking for something more traditional, Merritt View has a wonderful 13,000 square foot office space with numerous offices and workspace available. So there's definitely lots of types of different spaces available for companies to move right in that are moving ready.
Eric Bernheim: So are those sublease spaces that you're mentioning where they're moving ready?
Charlene O'Connell: The two that I did mention yes, are sublease spaces. And so they are fully furnished. But they are completely opposite sides. They have kind of an open floor plan, a very creative and unique building. And the other ones are traditional offices with a lot of private offices, for someone that may need that kind of workspace like an attorney or an accountant.
Eric Bernheim: So from a tenant perspective, what's some of the benefits and possibly some of the detriments if you're looking at sublease space?
Charlene O'Connell: Well, some of the positives for sure are that you can probably get a slightly below market rent, you probably can do a slightly shorter term, and it is fully furnished. Most likely, it's fully furnished. So you can literally show up and plug in your computers. I guess one of the detriments maybe if it's a very short term sublease, then you'd be renegotiating with the landlord pretty quickly after your move in, but to caveat that, we would advise the tenant to work with the landlord upfront, and to just strike a new full lease and not worry about the shorter expiration on the sublease.
Eric Bernheim: That definitely makes sense. And how does the short-term office rentals such as Regis, or that sort of work share space, how does that impact your business? Does that help you? Does it hurt your company? Can you talk to that a little bit?
Charlene O'Connell: Sure. I mean, anyone out there marketing office space is great, we're kind of all in the market together. I do think they serve a different need. Someone who needs maybe a short-term space maybe wants to come in once a week and have some collaboration with other people, startups, we often see will go into that type of scenario, because there is access to other amenities like printers and, and other people that they can hopefully meet and maybe do other business transactions with. I think for those people who are growing or have grown, those types of groups can become very costly, in which case, it may be more beneficial to secure your own office space. Certainly, as we've discussed today, there's lots of options out there in all four submarkets. So it certainly wouldn't hurt to contact a broker and find out what other options are out there?
Eric Bernheim: Yeah, I agree. I think, based on this conversation, it doesn't make sense not to talk to a broker, quite frankly, because you'll just be more informed and make a more informed decision. So is there anything else you want to add that maybe tell our listeners or something that we didn't cover that you wanted to talk about?
{00:25:00]
Charlene O'Connell: No, I appreciate your time. I would just conclude and agree with that as well. I mean, we are thrilled to have this opportunity to speak to you today and let everyone know a little bit more about Choyce Peterson and what we can do. But certainly, we would love to speak with people on a pro bono basis, to come out, introduce ourselves, kind of provide an overview and an update on the market. And just let them know what their options are.
Eric Bernheim: Absolutely. That's great. Thank you very much for joining us. And for everybody who is listening, you should definitely get your hands on one of those posters because it really is interesting to see what's taken and what's not and how much is out there in the market. So thank you again for your time today, Charlene, we really appreciate it.
Charlene O'Connell: Thank you so much. It was a pleasure.
Eric Bernheim: Thanks.
Thank you for listening to The Real Estate Roundup. If you'd like to learn more about FLB Law, please visit our website at flb.law. I invite you to connect with me on LinkedIn to be kept apprised of developing trends in the real estate market both locally and nationally. Thank you again to our expert guests, as well as our co-sponsor, The Greater Norwalk Chamber of Commerce.
