FAIRFIELD COUNTY
Commercial Market Report
SECOND HALF 2024
Executive Summary
SECOND HALF 2024
The US economy is remarkably strong, helped by a resilient labor market and workers’ steady income that continues to support their spending. Retirement assets and non-retirement wealth have been boosted by strong equity market performance. Full employment, elevated corporate profitability and technology innovation are all contributing to positive growth momentum as we enter 2025. Consumers feel confident enough to spend and strong household balance sheets contribute to such confidence. Discretionary spending remains robust, dispelling fears of a cooling economy and service-oriented industries are maintaining pricing power, reminding consumers that inflation is still a risk.
Corporations are cautious as the new administration takes the reigns. However, corporates continue to invest in their labor force knowing that in a labor short economy, employee training and education are a better alternative than accepting turnover and having to acquire and on-board new hires.
Overall, employment statistics in Connecticut are positive and Fairfield trends are above the state averages. The unemployment rate for Fairfield County was 2.8% as of the latest reported data, below the national average of 4.1% and below pre-pandemic levels.
According to data from AdvanceCT, private sector jobs in Connecticut reached an all-time high in July 2024, driven largely by healthcare and private education. The finance sector, whose employment in Connecticut had been declining for many pre-pandemic years, experienced growth in 2024. As an example, the private education and the health services sectors increased by 32,500 jobs, 3.1% annually between August 2021 and July 2024.
AdvanceCT also reports that a 5-year evaluation of Connecticut’s major industries shows positive earnings growth among all industry sectors. A meaningful percentage (44%) of the major industries in the state had +20% earnings increase over the 5-year span. The success of these industries bodes well for employment and consumption trends in the state. Information technology, finance/ insurance and lodging/food services are the industries that show the strongest earnings growth.
Summarizing, Fairfield County’s economy has a bright outlook underpinned by a highly educated population, positive demographics and proximity to NYC. Favorable nationwide economic trends further support this bright outlook. Service industries drive the Fairfield economy and their pricing power remains in place.
Greenwich Retail Vacancy Drops Helped by More Affordable Lease Prices
Greenwich retail experienced a mixed second half of 2024. There was good leasing activity, but space that was given back to landlords negated some of the contributions by new leases. In aggregate, supply and demand were in balance as improvements in occupancy achieved during the third quarter were almost entirely lost during a challenging fourth quarter. Lease prices appear to have weakened, however, the drag in pricing comes from the sub-let space which is less relevant for the underlying trends.
Greenwich retail is focused on hospitality, unique shops and boutiques. During 2024, several new eateries opened their doors, for example, Juju Cantina at 206 Sound View Avenue, Sweet Notes in Glenville and Makerie Café in Cos Cob. Other specialty stores are planned for 2025.
Greenwich Offices - Occupancy Trends Improve
Greenwich offices had a strong quarter, partially reflecting the emerging turnaround in office demand that is becoming tangible all over the nation. While Greenwich was always one of the top office markets in the country, the second and third quarters of 2024 were difficult and the supply of offices -from tenants giving up space- vastly overwhelmed demand. Pricing suffered as a result.
Executive Summary
SECOND HALF 2024
During the last quarter of the year, there was a palpable turnaround in office demand, and Greenwich enjoyed strong leasing and absorption activity, marking Q4 as the best quarter in three years. Pricing ended 2024 meaningfully below the beginning of the year, but ahead of the lows of the year. Occupancy finished the year at the highest level in six quarters. Eager tenants and more flexible landlords stroke deals at lower price points and vacancy declined noticeably.
Fairfield Retail Owners Gain Confidence in Leasing Trends
Fairfield retail had a strong leasing quarter and demand exceeded supply. Landlords, interested in bringing stable tenants, provided price concessions and the overall lease prices declined 10-13%. Net absorption was strong in direct retail space but weak in sub-let spaces.
The Fairfield City Council, voicing a commitment to improving the quality of life for residents, engaged a consultancy named Retail Strategies –headquartered in Birmingham-to help the County address retail property concerns and consult with the County on real estate and zoning issues. The objective is to advise the relevant zoning boards on retail zoning strategies and to develop approaches that will attract new retail businesses that will meet the community’s needs and desires.
Greater Fairfield Office Rebounds
Fairfield offices also enjoyed an upswing during the last quarter of the year, marking this the best period for Fairfield office leasing in three years. Corporates have been expanding their footprint in full-service buildings and re-designing office layouts in a way that meets the organization objectives and accommodates the demands of a returning workforce as they move toward a more forceful enforcement of in-person employee presence in corporate offices. Corporate tenants have enjoyed leverage with office landlords and new leases have been completed at a discount to prices prevailing in the first half of the year.
Investment Transactions Remain at Depressed Levels
Fairfield investment sales transactions remained at record low levels due to the challenging financing and valuation environment. Scarce debt financing, wide bid-ask transaction spreads and investors’ lack of confidence in valuations continue to depress investment sales. Despite these headwinds, median transaction prices rebounded in the last quarter of the year. However, the recorded rebound in transaction prices was undoubtedly impacted by the mix of properties sold and the low volume of transactions.
Houlihan Lawrence Commercial Team
Interesting commercial real estate investment opportunities will likely become available in the near future given the number of properties that will need to be refinanced in a vastly different interest rate environment. Liquidity is restrictive and poorly capitalized owners will seek to sell. However, there are numerous market and economic risks that will add to the complexities of acquiring commercial real estate. Understanding the market forces that are shaping the fundamentals for each property requires a deep knowledge of the property, local and regional insights, and close contacts with the right financial partners. Our Team is highly skilled in all these areas.
Reach out to HOULIHAN LAWRENCE COMMERCIAL for a complementary assessment of your real estate, an evaluation of a purchase target, and to receive an in-depth perspective on the dynamic Westchester commercial real estate market.
Fairfield Unemployment below National average
FAIRFIELD’S UNEMPLOYMENT RATE
Fairfield’s unemployment rate has stabilized at a range that is slightly lower to the pre-pandemic period. Services industries such as education and medical services are driving a very strong employment market.
Sources: COSTAR, US. Bureau of Labor Statistics, Unemployment Rate and Fairfield’s Median Household Income, CT. All data retrieved from FRED, Federal Reserve Bank of St. Louis; January 2025
Unemployment Rate in Fairfield County, CT
Office Space – Signs of Recovery are Emerging
After a tough period in the middle of the year, Greenwich office market begun to recover in the last quarter of 2024.
Fairfield office markets, resembling other office markets in the country, is also showing signs of recovery. Both, occupancy and price are on an upswing.
Sources: COSTAR, US Bureau of Labor Statistics, Data Reflects Fundamentals for Fairfield County and Greenwich office markets – January 2025
Retail occupancy improves in Greenwich and in the greater Fairfield area, but Rents Weaken
Greenwich retail real estate lost some occupancy and pricing in the last three months of the year. The larger Fairfield markets experienced better occupancy bur weakening rents.
Investment Activity Remains Depressed Similarly to other Markets
Investment activity in the Fairfield County remains depressed due to the difficult financing environment, higher interest rates and uncertain valuations.
FAIRFIELD TRANSACTIONS REMAIN DEPRESSED
Sources: COSTAR, US Bureau of Labor Statistics, Data Reflects Fundamentals for Fairfield County and Greenwich office markets – January 2025