THE BLESSINGS OF RED TAPE
By Alexander Soule
Fairfield County Business Journal

FCBJ Week of December 22, 2008 - Even as the 2008 economic collapse entered the U.S. history books, Connecticut held out hope that it will suffer a comparatively mild blow despite Fairfield County's position within the ripples of Manhattan's troubled financial sector.

If that holds true, it would be in no small part due to a construction sector held in check by sky-high costs for raw materials and labor; zoning restrictions in many parts of the state; and difficulties securing financing for redevelopment projects that involve environmental cleanups.

Connecticut remains one of the more difficult states in which to undertake large projects, according to Site Selection magazine's recent survey of the economic development environment in the 50 states. While that hampered growth throughout the decade, it might also limit the contraction under way as Wall Street's financial woes worsen.

Through the first three quarters of 2008, commercial property owners in Fairfield County were beginning to feel the pinch of the swiftly tightening economy, with commercial broker Cushman & Wakefield reporting that nearly 600,000 square feet of prime Class A office space became available, as well as more than 125,000 square feet of cheaper Class B space. Using the industry yard stick of 250 square feet for each employee, that suggests local employers shed nearly 3,000 office jobs in the first nine months of the year.

Still, with brokers pegging the overall vacancy rate between 14 percent and 16 percent, property owners had yet to feel significant pressure to drop lease rates, according to Lesley Kamnitzer, a research analyst with Grubb & Ellis who also tracks the market.

Fairfield County's two most prestigious commercial projects continued, with Royal Bank of Scotland's regional office slated for completion next summer; and the work beginning in earnest on the first buildings at Harbor Point in Stamford.

The latter project served also as perhaps the most visible red flag of the turmoil in the markets, after Stamford-based Antares Investment Partners was nudged aside from the massive development it planned and nurtured, with its Philadelphia-based equity partner Lubert-Adler bringing in Norwalk-based Building and Land Technology (BLT) to oversee the construction phase of the project.

BLT successfully built and leased the Towers complex in Norwalk that attracted tenants like GE Capital and Xerox Corp.

The bustling activity in Stamford's South End contrasts with stalled projects elsewhere in the county. In Redding, Georgetown Land Development Co. demolition stalled at an old mill slated for a mixed-use redevelopment, with the developer blaming the state's bond approval process. After initial clearing work, the 95-7 mixed use site in Norwalk lay mostly idle. The creation of Fairfield Metro Center has bogged down in recriminations of ethical lapses between town officials. And real estate insiders see little hope of Bridgeport's long-sought Steel Point redevelopment getting into gear.

The year was not without commercial-construction activity outside of Stamford - Davis Marcus Partners completed construction of 60 Danbury Road in Wilton, leasing the third floor to Louis Dreyfus Corp.

Even as it moved ahead on Harbor Point, BLT found the wherewithal to acquire an undisclosed equity stake in William Pitt Sotheby's International Realty, among the larger residential real estate agencies in Connecticut with more than 20 offices and 700 agents at last report.

BLT's move signaled confidence in the long-term prospects for the state's housing sector.

"The market has been in a downturn as we all know," said Paul Breunich, a William Pitt Sotheby's principal. "We have come up with a solution to get us through this downturn and reap the benefits when it turns around."

While commercial construction was limited, Fairfield County saw several residential projects proceed, with Trump Parc Plaza joining the RBS building as the most striking change to the Stamford skyline; and Hannah Real Estate proceeded with multiple projects on the periphery of downtown.

In Stamford last week, Connecticut's new transportation Commissioner Joseph Marie indicated a new parking garage for the city' train station could be delayed as the state considers broadening the project by attracting residential and commercial developers. In late November, Gov. M. Jodi Rell gave notice to state agencies to assemble lists of permitted projects that are "shovel ready," in anticipation of federal funds that might be freed up as part of any stimulus package from Washington, D.C.

www.fcbizj.biz - Week of December 22, 2008 - Fairfield County Business Journal