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Commercial Real Estate Trends in Fairfield County

Gain insights on office values in Fairfield County at the Commercial Real Estate Conference. Learn about market trends, vacancy and value analysis, and future projections discussed by Jeffrey H. Gage. Find out about competitive real estate strategies and significant deals in the region.

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Commercial Real Estate Trends in Fairfield County

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  1. CT Commercial Real Estate Conference An Overview of Office Values in Fairfield County Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  2. Agenda • Market Overview • Vacancy Analysis • Value Analysis • What the future brings • Questions & Discussions • Send me your email for a copy of the link to the statistics Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  3. Here is my Email • Jgage@cresllc.com Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  4. Summary of the StatisticsData Provided by Jones Lang LaSalle Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  5. So what’s happening? • There is not as much gross leasing activity • 1.2 mm sq. ft. vs. 3-4 mm sq. ft. • There is plenty of new space on the market • Speculative development • Renovated development • Tenants are staying where they are Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  6. Why is demand off? Leases still expire 5-10 yrs. • 10% of the market should be in play for a move each year • Tenants have no confidence in their businesses • Employment is down, so few companies are expanding • Technology is supporting the virtual office environment • Higher operating efficiency Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  7. What were/are the significant deals? • GeRe leaves 695 East Main Street empty • Purdue Pharma subleases back space it leased to UBS in the Purdue building • Sun Products purchases the Unilever soap products line and relocates to Wilton • UBS holds onto space it had on the market for sublease • Starwood is looking to come to CT • GE continues to shrink and consolidate • Hospitals take more space Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  8. Value = f(net rent, leverage, return on equity) • Net rents are trending down • Loan to value ratios are trending down • Interest rates are trending up • Cap rates are trending up • Equity is sitting on the sideline……waiting for higher returns Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  9. Components of Gross Net Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  10. Market shift in value comparison Two Years Ago This Year Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  11. Market shift in value comparison (cont.) Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  12. Why are net rents trending down? • Demand is down • There is not much movement in the market • Tenants are staying put • Short term renewals • Companies are not in a growth mode • Buildings with above market rents can afford to drop prices • The buildings that have space want to fill it • Concessions are high • Effective rents are lower Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  13. Real question from a landlord Question:Where should I be making deals on my empty space? Answer: 20% less than what you would do to keep a tenant Why?... “That’s what other landlords are doing to take your tenants away and that’s what you need to do to take theirs.” Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  14. What is different about this time vs. last time? • There is little new development and no overbuilding • Rents were in a steep incline before the drop • Some property was selling at above replacement cost • Other property was selling based on speculative income • Values were escalated without regard to basic fundamentals Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  15. Projections/Conclusions • More space will come on the market • Prices will continue to drop • The good stuff will lease first • Buildings will trade at a discount to replacement cost until supply diminishes • Rents will stabilize at a number that justifies new construction, 9-11% cap on cost. Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  16. Special Thanks to • Jovani Rampersad and Stacey Cassidy who helped with the Statistics • Jones Lang LaSalle who kept an open mind • Glen Larson UCONN MBA who fixed my slides! • Thank you for your participation in today's events!! Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

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