Executive Summary

The US economy is at a crossroads. Commercial Real Estate investors are cautious and expect a meaningful slowdown in the broad economy, driven by a sharp removal of monetary accommodation. In fact, commercial real estate investment sales reflect the sober outlook that commercial real estate investors appear to embrace.

Consumers, on the other hand, are confident, anchoring their outlook on a strong labor market that has shown resilience in the face of steep interest rate rises. Buoyed by consumers, the economy remains stronger than what most observers had predicted and Q2 GDP, “advance estimate”, reported at 2.4%, demonstrates the vibrance of the economy at large. Persistent consumer confidence has sustained the service sector of the economy and Fairfield County is benefiting immensely from this strength. Service industries are gaining an even greater importance in the economic make-up of Fairfield County.

The Pandemic has altered supply-demand dynamics across many aspects of the economy. Labor force participation rates dropped during the Pandemic, and these have not recovered enough to alleviate labor shortages. Consumers migrated work and play activities to their homes, boosting demand for residences and creating surpluses of office space that now lies vacant. Consumers changed their purchasing behaviors creating huge demand for goods that would be delivered in short order to their homes. This has increased demand for warehouses located in proximity to residential areas and other consumption clusters. In sum, consumer driven behavioral changes are re-defining patterns of work, consumption, and the dynamics of commercial real estate supply and demand, in cities and in suburban areas such as Fairfield. Overall, migration of households from NYC and other urban centers into Fairfield has created a positive demographic wave that continues to yield benefits for the County.

Greenwich Retail Vacancy Drops Helped by Lower Rents

Vacancy rates have declined sharply over the past year – by approximately 2%- and now stand at a low of 3%. Demand for retail space has been encouraged by lower pricing and the continued strength of the high-end consumer. Lease asking prices weakened approximately 10% in the span of the last four quarters creating an attractive entry point for retailers and service providers that had been considering exposure to the Greenwich market.

Both direct and sub-let space were active as leasing activity has rebounded and stayed at healthy levels. New eateries, service providers and retail brands have found attractive space and started new leases over the last six months, Examples are Freebird, a fast-food establishment focusing on chicken dishes and Abercrombie and Fitch- a well-know retailer of jeans and casual clothing.

Greenwich Offices Sustain Premium Pricing and Occupancy

The office sector, nationally, is experiencing strong headwinds stemming from the Pandemic. However, Greenwich office sector is in a particularly advantageous situation. Surrounded by wealthy suburbs and always a sought-after niche market for the financial services industry, its position has not lost luster. Healthy supply-demand fundamentals, pricing stability and declining vacancy all demonstrate the uniqueness of this market.

During the second quarter of 2023, leasing activity was very strong, reversing a weaker first quarter. Supply-demand balance was favorable, and occupancy increased close to 1%, a remarkable performance in the context of the national market. Going forward, we expect this market to remain strong as long as the inflows of households and corporates into Fairfield continue.