Panel sees tepid growth in commercial real estate
Published 11:56 am, Saturday, July 27, 2013
Owners of Fairfield County office buildings will continue to grapple with vacancy rates of more than 20 percent into the near future, but commercial real estate professionals voiced confidence in a slowly improving marketplace.
"We're optimistic. Maybe that's because we've been active in the marketplace," Brett Wilderman, principal of Darien-based Forstone Capital, said during a six-member industry panel at the Stamford Hilton last week. "We're bullish for the next three or four years as market dynamics unfold."
The discussion, attended by an audience of 250 and hosted by Bisnow Media, which publishes data and holds events about commercial real estate in 23 U.S. cities, also included Malkin Properties' Jeff Newman; Jeremy Leventhal at Faros Properties; John Barnes, of SL Green Realty; Vidaris' Alex Argento; and Jose Cruz at Holliday Fenoglio Fowler.
Panel members joined Wilderman in his upbeat outlook, but Cruz warned that rising interest rates and slow job growth in the region are limiting growth in office occupancy levels.
"We're seeding a bifurcated market. The best properties with location and amenities -- people are looking to trade up to those properties," Newman said.
Many of those properties, particularly those close to the Stamford Transportation Center, have occupancy levels of 85 percent or more, while others more than walking distance from the station have much lower levels.
Because landlords three to four years ago were forced to agree to early renewals, allowing tenants to lock in lower rental rates, there are few renewals occurring now, Newman said.
"Deal flow is light. There are a lot of lookers. Leverage is still on the tenant side," Wilderman said, adding that tenants are demanding "green" improvements to make buildings more energy efficient. His company has taken advantage of government programs, including the C-Pace (Commercial Property Assessed Clean Energy) loan program, to fund improvements.
"It's not a fad. It's here to stay. Our clients understand the need to be forward thinking," said Argento, whose company provides services for building efficiency. "In this market, we've seen a lot of repositioning with small changes to differentiate yourself from your next door neighbor."
While building owners can do much to lure tenants through improvements and tantalizing rental rates, the state's transportation infrastructure can negatively affect a company's decision to relocate to Connecticut, according to the panel.
"There's got to be more investment in the infrastructure. There's no doubt about that," Newman said. "For continued growth in this region, we have to invest in infrastructure."