Office Market in Stamford
Sees Signs of a Rebound

Trickle-down economics appears to be at work in the Stamford, Conn., region as highflying hedge funds and expanding financial companies are fueling the recovery of the area's office market.

The hedge-fund industry's love affair with the tony nearby town of Greenwich -- where many of the richest fund managers want to live and work -- has held average office rents there above the $40-per-square-foot level. That is within range of the above-$50 average fetched in midtown Manhattan and well above the Stamford region's fourth-quarter average rent of $25.62 per square foot, according to Property & Portfolio Research Inc., a Boston real-estate research firm. Increased demand has tightened Greenwich vacancies and pushed some companies into nearby Stamford.

One of Stamford's big wins was Royal Bank of Scotland Group PLC. This year the bank plans to begin construction of a 500,000-square-foot, glass-and-steel building to house its North American global banking and markets businesses. About 700 employees in Greenwich and 550 from New York City will be relocated to the building, along with about 600 workers expected to be hired.

That commitment boosted confidence in the market, brokers say. "Landlords in downtown Stamford right now are feeling quite good about raising rents and shrinking concessions" to tenants, says Tom Pajolek, a broker and senior vice president at CB Richard Ellis Inc. in Stamford.

The largely suburban region stretches northeast of Westchester County, N.Y., along Long Island Sound. The area, anchored by the cities of Stamford, New Haven and Bridgeport, includes Fairfield County and its many wealthy bedroom communities, such as Greenwich and Darien, as well as New Haven County to the northeast, home to Yale University. Some 1.8 million people live in a region that has a median income of $64,817, about 40% above the national level, according to Economy.com, a unit of Moody's Corp.

The region's underlying economic picture is a little more mixed than its blue-chip patina suggests. The area's New England charm and waterfront estates within easy commuting distance of Manhattan have long made it a prime choice for corporate headquarters. But the region recently saw two of its Fortune 500 companies defect. International Paper Co. announced last year it was moving its global headquarters to Memphis, Tenn., and packaging company MeadWestvaco Corp. said in February that it would move its headquarters to Richmond, Va.

In addition, the area began to see steady job gains only in 2005, and employment increased by 0.7% in February from the year earlier, below the national average of 1.5%, according to the Bureau of Labor Statistics.

The lagging economy has held back improvements in the area's overall office market despite submarkets such as Greenwich. Office vacancies for the region, pushed up by the submarkets of Danbury and New Haven, are edging down after hovering in the 18% range since 2002, while average rental rates appear to be stabilizing in the $25-per-square-foot range off a high of $34 in 2001.

The office market's health is checkered, with top-tier buildings near the Stamford train station raising rents, while the market for space near the edge of town is softer, brokers say.

Gary Johnson, chief executive of Vertrue Inc., felt the impact of the healthier extremes. He moved his Internet marketing company and about 200 employees last month from downtown Stamford into a renovated former tire factory in Norwalk. Mr. Johnson had faced an expiring lease and the prospect of paying more than $40 a square foot in Stamford on office space he had rented for about $19 a square foot some 10 years ago.

Instead, he is paying considerably less -- he declines to say how much less -- for an open-space environment custom designed for his company.

Editor's Note: The Living In feature will no longer accompany Blueprint.

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