Rivals Fairfield, Westchester counties play up their strengths to prospective tenants
If viewed from a far enough distance, the commercial real estate markets in Fairfield and Westchester counties can be seen as one giant market trying to lure tenants seeking proximity to New York City without Manhattan-like lease prices.
Many real estate firms announce quarterly reports that include data from both markets and have offices on either side of the border.
“At the macro level, they look the same,” said Jim Fagan, senior managing director of Cushman & Wakefield of Connecticut and who manages the firm’s offices in Fairfield and Westchester counties.
A closer look, however, reveals markets with unique characteristics and interesting strengths and weaknesses when compared side by side.
Fagan said transportation is a big factor in determining where a tenant will end up signing. Westchester holds advantages over Fairfield County in that it is closer to Manhattan, has an airport and boasts an infrastructure with numerous parkways and highways.
“All of Westchester is about the same distance from the city,” he said. “Fairfield County runs away from New York City.”
Fairfield County, Fagan said, has only three major roads, but the numerous train stops along the coast are attractive to prospective tenants.
“Transit-oriented districts are dominating now. If the building is close to a train, there is more desirability,” he said. “The idea of a tree-lined office park is not as desirable as being close to a train now.”
Weighing the costs
Fagan said other considerations such as cost of living, commute distance for employees, cost of doing business, access to skilled workers and incentives play a big role in where a company settles.
“There tends to be more meaningful incentive packages from Connecticut, depending on the sector,” said commercial real estate broker James Ritman of Newmark Knight Frank’s Stamford offices.
Millions of dollars in tax credits and rebates from Connecticut ultimately lured animation giant Blue Sky Studios to Greenwich from White Plains in 2009. Two years ago, Norwalk-based Xerox threatened to move its headquarters out of state, but stayed put with $4.4 million in incentives. General Electric reportedly had Westchester County on its short list for new homes when it left Fairfield in 2016 before landing in Boston.
New York is waving carrots in front of tenants, as well, both on the state and local level. In his first “state of the county” address this month after taking office in January, Westchester County Executive George Latimer made a general pledge to support business, including holding the line on taxes and soliciting input from companies on other steps Westchester can take.
“We want to partner with our businesses — large and small — to meet their employment needs and their technology needs,” he said. “We need to attract businesses and keep business here in Westchester.”
While business property taxes are typically hidden within lease rates, Fairfield County has much lower residential property taxes, which Fagan said is important to companies who have employees relocating.
The popularity of each market ebbs and flows, Fagan said. Westchester County, particularly the White Plains Central Business District, is a stronger market now, having jumped ahead of Fairfield County about 18 to 24 months ago.
“White Plains CBD is very hot now,” he said, adding that rents are up 15 to 20 percent there over the last 18 months.
New York Life and Danone, the parent company of Dannon, recently signed large leases and moved hundreds of employees to downtown White Plains from other Westchester locations. Also in White Plains, Ginsburg Development Cos. and Robert Martin Co. earlier this month purchased a two-building, 571,000-square-foot complex for $83 million.
Robert Weinberg, principal of Robert Martin, said he hopes the purchase adds to the “positive momentum that has been driving recent demand in the downtown office market.”
Fagan said Yonkers, long a sleeper in Westchester County, is also an emerging market with a “Brooklyn feel” to it.
Fagan said Fairfield and Westchester counties also compete with Long Island and New Jersey.
Stamford, despite some large vacancies, remains the hotbed for commercial real estate in Fairfield County. According to a report from Colliers International Group, Stamford had eight of the top 10 leases in Fairfield County during the first quarter of 2018.
“What Carl (Kuehner) has done is Stamford is remarkable,” Fagan said, referring to the principal of Building and Land Technology, the developer Harbor Point in the city’s South End.
Harbor Point in the last year has recruited two Westchester-based businesses — Walter’s Hot Dogs and Patisserie Salzburg — to join its mixed-use development. Harbor Point is one of many “live, work, play” development concepts popping up throughout Fairfield County.
Karolina Alexandre, research manager at Newmark Knight Frank, said those types of mixed-used developments are working in Fairfield County’s favor. “Westchester is just starting, but we’re way ahead,” she said. “Another good thing for Fairfield is that it’s diversifying its tenant base.”
Trademark Fairfield is another example of a new live, work, play development in Fairfield County. The luxury apartments are adjacent to Fairfield’s Metro-North station.
“The fact is it’s far more difficult in Westchester County to immediately eliminate more car travel, but to anticipate that it will change tremendously is difficult,” Phil Kuchma of Bridgeport-based Kuchma Corp. said. “They have mostly campus-type office development so the opportunity for people to use mass transportation and still keep their schedules certainly seems to be more difficult.”
By the numbers
As of the first quarter of 2018, Fairfield County had 9.5 million square feet of available office space, as calculated by the Stamford office of Cushman & Wakefield, with the better class A space prized by corporations carrying a countywide average asking rent of $38.12 a square foot.
That compared with 6.1 million square feet of total space in Westchester, where the asking rent was $28.73 a square foot for class A space.
In its own first-quarter report, the Stamford office of Colliers noted Fairfield County’s “stable fundamentals” and Westchester’s falling leasing activity, but rising lease rates.
Fairfield County’s Eastern submarket, despite its distance from New York City, has “evolved into one of the most competitive submarkets in the county,” with availability rates falling for fourth consecutive quarters. Lease rates, however, have fallen slightly in the submarket.
The Northern market in Fairfield County, which includes Danbury, is the most competitive it has been since 2016, according to the Colliers report.
The writer may be reached at firstname.lastname@example.org; 203-731-3338
Macaela Bennett, Jordan Grice, Paul Schott and Alexander Soule contributed to this article.