City Consultant: Don’t Build New Office Space
NORWALK, Conn. (February 27, 2015) – An updated report examining the current state of the Class “A” office market in Norwalk was recently submitted by CBRE Group, a leading commercial real estate market analyst hired by the city of Norwalk, to the Joint Committee studying the proposed “95/7” project. The Joint Committee is a combination of Norwalk Planning Commission, Common Council Planning Committee and Norwalk Redevelopment Agency members.
CBRE’s report to the City of Norwalk concludes that existing market conditions do not justify new office construction. The report examines several factors, including new construction costs, financing, delivery time, vacant inventory, Merritt 7, and area competition.
One factor to note, Class A office space in Norwalk currently rents at an average of $32 per square foot; Stamford commands slightly higher rents of $38 per square foot, while Greenwich commands significantly higher rents at $71 per square foot. CBRE’s report affirms that new construction costs today necessitate rents in the high-$40’s to mid-$60’s and involve a waiting period.
The analysis of the commercial office market in the greater Norwalk area was requested as the Committee considers a proposed change to the Land Disposition Agreement (LDA) for the 95/7 parcel. The site is currently entitled for up to 1.1 million square feet of mixed-use development, with 600,000 square feet dedicated to office use.
Given that the vacancy rate for Norwalk Class A space is currently 16.3%, with 734,000 square feet of inventory vacant, General Growth Properties (GGP) believes the development of a mixed-use project that includes office space is not viable in the near or intermediate-term.
GGP remains confident that the best way to utilize the site is a mix of retail, hotel, and public realm uses. Though primarily a high end retail fashion center, the project will include public plazas, education space, public common areas, restaurants and a select service luxury boutique hotel. The center will create nearly 2,600 ongoing jobs – 2,285 of which will be in Norwalk – at an average salary of $41,700. Located within an Enterprise Zone, the center will generate a projected $5 million in annual city tax revenue and more than $5 million in City permit fees.
General Growth Properties, Inc. is an S&P 500 company focused exclusively on owning, managing, leasing, and redeveloping high quality retail properties throughout the United States. GGP is headquartered in Chicago, Illinois, and publicly traded on the NYSE under the symbol GGP.
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