Millennials starting to impact Fairfield County’s office market
As millennials age, start families and move to the suburbs, Fairfield County’s commercial real estate market will evolve with the generation, some commercial real estate brokers say.
“Young families will drive companies to come out here. It’s a war for talent out there,” Jim Fagan, Cushman & Wakefield’s managing principal for the Connecticut and Westchester markets, said. “As they move, the companies will chase them to allow employees to have better quality of life and be closer to their kids.”
Fairfield County’s office vacancy rate is about 23 percent, compared to 8.3 percent in New York City. Fagan said millennials in general had put off having children and lived in apartments in cities. As they settle down in the suburbs, the Fairfield County vacancy rate will shrink with minimal impact on the New York City market.
“We’re just starting to see it in commercial real estate. They are also driving some of the residential market,” Fagan said. “While city living is cool, it’s less practical for families and very expensive. The city is white hot and still attracting jobs. New York City won’t even feel it. It used to be that what is bad for New York City is good for the suburbs. Now, I think, what is good for New York City is great for the suburbs. If Fairfield County attracted 3 or 4 percent of the New York City demand, the (Fairfield County) market would tighten instantly.”
Fagan can foresee scenarios in which a New York City company looking to expand will create a satellite office in Fairfield County instead of taking more space in the city.
“If you have 100,000 square feet in New York City and you need to expand, why not take 50,000 square feet in the suburbs?” he said. “Fairfield County from an office/landlord perspective is very vacant. That creates a lot of opportunity. I think you’ll see tenants take advantage of that quickly.”
John Hannigan, principal of Norwalk-based commercial real estate firm Choyce Peterson, said Fairfield County is benefiting from companies relocating from out of state, but not necessarily from New York City.
“It’s favorable that Manhattan is very, very tight, but we’re not seeing a significant outflow,” he said in a recent interview with Hearst Connecticut Media. “But we’re getting companies coming from other states, so that’s almost been an equal or more dominant trend than companies coming from Manhattan. … We had Henkel come in from out of state and we had Charter come in, and those companies have been growing.”
Vital demographic, Indeed
Millennials, who are now between 22 and 37, represent the largest segment of the U.S. labor force at 35 percent, according to a Pew Research Center analysis of U.S. census data. Millennials are projected to surpass baby boomers as the generation with the highest population in 2019.
Young workers make up a large portion of the workforce at Indeed’s East Coast office in Stamford, as well as the job site company’s global headquarters in Austin, Texas. Indeed opened its Stamford office in 2011 with 50 people at 177 Broad St. It now has 850 people in Stamford on eight floors, with a ninth being built out. The company has said it wants to expand to 1,200 workers in Stamford.
Millennials have factored heavily in the company’s growth and future expansion will depend largely on young workers as Indeed recruits from area universities and colleges with knowledge of the tristate region.
“We believe that southwestern Connecticut is a great place for people to live and work and build their lives,” said Nolan Farris, Indeed’s senior vice president of sales. “We think we’re able to continue to attract a highly educated, tech-savvy employee base.”
Getting here and there
Fagan said buildings near train lines and other transportation hubs stand to gain the most from the potential uptick in commercial real estate activity. Not only do they make commuters’ lives easier, but many millennials are choosing to live near rail lines to keep Manhattan within reach.
Young families, Fagan said, want to maintain their work-live-play balance in the suburbs, but do not want to give up New York City altogether.
“Anyplace close to a train stop is an attractive opportunity for tenants because it gives them the best of both worlds,” he said.
There is a limited set of data to support that buildings do better that are situated closer to Metro-North. Of multitenant trophy buildings located in Greenwich, Stamford and Norwalk, occupancies were highest for offices located within a half-mile of a commuter rail station, according to a Hearst Connecticut Media analysis as calculated by the Norwalk-based commercial broker Choyce Peterson.
Excluding the former UBS building in downtown Stamford that only recently became available for lease, occupancies averaged 80 percent in 33 office buildings totaling 7.5 million square feet of space, sufficient space for more than 40,000 workers using the yardstick of 175 square feet of space for each individual.
In the next concentric circles stretching just past three-quarters of a mile, occupancy rates in 19 buildings were 20 percentage points lower on average, representing about 4,000 fewer workers those buildings might have if they matched the occupancies of buildings closest to train stations.
Farther out from Metro-North, occupancy rates dropped to 65 percent on average according to Choyce Peterson’s data, with the number skewed downward by the recent availability of a former General Electric building at 201 High Ridge Road.
Still, there are plenty of exceptions — in Greenwich, Blue Sky Studios remains committed to its animation studio at 1 American Lane on the Westchester County line, despite its location more than 6 miles from the nearest Metro North station. The building’s occupancy rate as of June matched that of buildings closest to lower Fairfield County’s Metro-North stations.
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Paul Schott and Alexander Soule contributed to this article.