The 40.8-million-square-foot general purpose, multi-tenant Fairfield County office market is improving slightly, but remains in a deep hole after more than a decade of decline. In the second quarter of 2012, according to Reis data, 105,000 square feet of net absorption pushed the vacancy rate down 30 basis points to 20.0%, which was down 90 from a year earlier. The rate was essentially unchanged in July.
The hole, however, is deep with virtually no expansion between the recessions of 2001 to 2003 and 2008 to 2011, each of which saw extensive negative net absorption. By the end of the latter year the occupied inventory was down by 5.6 million. The damage was greater in the Class A segment, where the second quarter vacancy rate was 22.8%, than in Class B/C which had a 17.4% rate. Reis predicts net absorption will be positive through 2016 but only moderately, as the vacancy rate stays above 17.0% despite limited new supply.
Rents are edging up despite high vacancy according to Reis, as in the second quarter both the average asking rent and the average effective rent increased 0.1% to $34.12 psf and $28.45 psf. The year-over-year gains were 0.7% and 1.0%, respectively. The Class A asking average is $41.49 psf for the second quarter, unchanged for the period, compared with $27.00 psf for Class B/C, up 0.1%. Rents edged up a penny asking and two cents effective in July, and gains of 0.9% asking and 1.2% effective are forecast for all of 2012. Larger gains are forecast to follow.
Cushman & Wakefield reports an overall vacancy rate of 21.2% and an overall weighted gross rental rate of $35.34 psf. “Fairfield County, in general, had the second slowest half-year period in the past decade, after 2009.”