Column: The State of the Greenwich Office Market
By Allan Murphy
Sentinel Business Columnist
The Newmark third quarter Greenwich office market report was just released, so this is a good week to step back and parse the numbers to see what’s happening. As a reminder, Greenwich is a small market in general, and made even smaller by its defacto division into two or three submarkets—western Greenwich being one market and downtown Greenwich (often referred to as the “CBD,” or central business district) as the other significant market. Even the CBD market is somewhat bifurcated into the CBD “train station” market (meaning a short walk to the train) and the rest of the CBD market.
Our market research department actively tracks 59 class A/B properties in all of Greenwich, with a total of about 4.4 million square feet of office space. There are about another 60 smaller properties of varying quality, with about another 600,000 square feet of space, for a total market of about 5 million square feet. Of the properties we actively track about 45 percent of the square footage (in 32 buildings) is in the CBD. This market has an availability rate of 13.4 percent, with asking rents ranging from the $50s per square foot to $125 per square foot, and with an overall average of just over $90 per square foot, and with class A average asking rates close to $100 per square foot.
An illustration of the market difference between train station-proximate and other CBD properties is that 55 Railroad Avenue asks $120 per square foot and Pickwick Plaza asks $85 per square foot. They have the same ownership, both are (effectively) on Greenwich Avenue, and both are attractive class A properties. Despite the significant pricing differential, there is significant vacancy at Pickwick Plaza and virtually no vacancy at 55 Railroad.
Tenant activity in the CBD has been reasonably steady, with the market continuing to tighten. In the last quarter AQR leased an additional 24,000 square feet at 55 Railroad Avenue, and Citadel leased an additional 13,000 square feet at 33 Benedict Place, where it now occupies all of the third and fourth floors. The availability rate fell over the last 12 months from 17.3 percent to 13.4 percent, with asking rates flat to slightly higher. The CBD class A rates are comparable to the midtown Manhattan Madison Ave. and Fifth Avenue submarket. A tenant seeking a large block of space (40,000 square feet or more) would have only one Greenwich CBD train station option.
Moving from the CBD to the rest or Greenwich (which mostly means western Greenwich) leads to a different set of market dynamics, but this quarter the story line is similar. We actively track 27 class A/B buildings with about 2.4 million square feet. The availability rate has declined over the last 12 months from 20.3 percent to 17.3 percent, and class A asking rates have increased by 6 percent from a year ago, to almost $45 per square foot. That’s good news for this market (if you are a landlord), but still, what an amazing pricing difference to have to get in your car to go to Greenwich Avenue or on a shuttle to get to the train station. It is two to three times more expensive to be “on the Avenue” versus being in western Greenwich. Apparently, the age-old adage of location, location, location is still operative.
Much of the leasing in western Greenwich has been driven by medical tenants, specifically Stamford Hospital at 75 Holly Hill Lane and WestMed at 644 West Putnam. One recent loss for western Greenwich is the coming move of XPO Logistics from Greenwich Office Park to 35,000 square feet at Greenwich American Center. Technically this keeps XPO in Greenwich (in the far northwest corner beyond Westchester airport), but it “feels” as though they’ve left the market.
The bigger western Greenwich news is the Fareri Associates purchase of Greenwich Office Park, making Fareri Associates by far the biggest western Greenwich landlord. We are hearing about some great new ideas that may accompany this purchase and we are looking forward to the continued revitalization of the western Greenwich market.
Special thanks this week to Karolina Pardo-Alexandre and Karoline Benedicto from the NGKF market research department, as they do the hard work of tracking and reporting the forgoing facts and figures.
Allan Murphy is a senior managing director at the commercial real estate services firm Newmark Grubb Knight Frank. He has specialized in the Greenwich and Stamford markets since 1996.