By Allan Murphy
Sentinel Contributor
On Friday the sublease terms had been agreed-upon and the sublease contract was to be drafted. But on Sunday a new tenant group appeared, willing to sign a longer term lease direct with the landlord at a mid $90s per square foot rental rate. The landlord terminated the existing lease on the space and signed a deal for the longer lease term directly with the new tenant – the prospective subtenant lost the space.
Separately, in the same week but at a different building, a tenant group was poised to lease 2500 square feet at $115/SF but decided to look at “one more property” with a “unique” look and feel. There was already an agreed-upon deal for part of the unique space but the newcomer tenant liked the space enough to lease the entire 4000 square feet (despite needing only 2500 SF), walking away from the landlord with the $115/SF space, and simultaneously “bumping” the tenant that was planning to lease part of the 4000 SF space.
Meanwhile, at yet another building a tenant needed to lease 10,000 SF at almost $100/SF in order to secure the 3000 square feet that that they really wanted. The tenant will build out the desired 3000 SF and hopes to sublease the remaining 7000 SF.
All of the above has happened in Greenwich CBD Class A buildings over the last few weeks. Crazy but true.
The point of the above anecdotes is to illustrate that tenants and landlords sometimes change their minds (and deals) at the 11th hour, usually for good reasons, but significantly disrupting the plans and “handshakes” that might previously have existed. One of the great challenges of real estate, and especially commercial transactions, is that there is often a significant time lapse between when a deal is tentatively agreed-to and when that deal becomes legally binding via a lease contract. Despite the best of intentions the passage of time leads to changes in needs and opportunities for both tenants and landlords and that in turn leads to changed – and sometimes failed – transactions.
Market Summary Update…..the Greenwich class A office market has a vacancy rate of about 18%, both in the CBD and overall. You would think that means there is enough space around and available to satisfy most tenants, but as you can see from the above illustrations, tenants are fickle and willing to pay up and move fast for spaces they desire. Which usually means high quality space close to the Greenwich train station. And means paying $90/SF and up for that quality and location. And means competing with other tenants to secure the space.
Despite a reasonable amount of space to choose from the most active tenants (almost always investment firms) often seem to compete for a relatively small amount of the best space in the best buildings.
Overall tenant activity has been sluggish, but demand seems to be picking up. Even western Greenwich may be emerging from the doldrums of the last several years – Greenwich Office Park is said to be negotiating on 7 new deals (after recently closing several others), and 75 Holly Hill Lane completed 3 new deals in the last few months. In the CBD there is good tenant activity at almost every train station proximate property.
Sales activity also seems to reflect an improving market – recent third quarter commercial building sales include 98-102 Greenwich Avenue for almost $1100/SF, 2 Soundview Drive for over $800/sf, and 599 W Putnam and 67 Holly Hill Lane for $430/SF and $367/SF, respectively. We have some action – let’s hope it continues!
Allan Murphy is a Senior Managing Director at Newmark Grubb Knight Frank. Since 1996 he has specialized in the Greenwich and Stamford markets, representing tenants, landlords, and investors in the leasing, sale, and acquisition of office, retail, and mixed use properties. Prior to that, he served in several capacities in the real estate industry including as a Vice President in JPMorgan’s real estate banking group, an investment sales specialist with Cushman & Wakefield, a manager of C&W’s property tax consulting business, and Vice President of investment sales at The Codman Company in Boston. Mr. Murphy is a 20-year Greenwich resident, a member of the Greenwich Property Owners Association, serves on GPOA’s Commercial Regulations Committee, and holds a Bachelor of Science degree from Cornell University.
