Tale of the City
Slow-and-steady residential activity, propped by a brisk rental market, helps offset commercial market woes
Finally some good news! Home sales and prices inched up in Stamford last year, and office occupancy rates seemed to hold their own. Interestingly, the sweet spot in the city’s real estate industry in 2010, and likely going forward, is the residential rental market, which has seen a surge of activity according to property owners, developers, brokers, and city officials.
Like a perfect storm of wind and rain, two forces seem to be fueling the trend. One is that young people commuting to jobs at investment banks or classes at UConn are growing weary of dawn travel on crowded trains but don’t want the long-term commitment that comes with buying homes. Another is that businesses seem to need less space for their employees these days, perhaps because computers are picking up the slack, companies still aren’t hiring or more people are working from home.
In any case, Stamford’s citywide office market, which continues to contend with the fact that about a quarter of its spaces are empty, may not fill with bodies anytime soon, making some of those properties ripe for conversion.
“The general demand for office space is down, so we saw no future in buildings as office buildings,” says Richard Freedman, president of Garden Homes Management, which is turning 800 Summer Street—a former home to insurance agents—into an eighty-nine-unit apartment building.
The Stamford-based company had previously reinvented other Nixon-era work spaces—25 Third Street and 111 Prospect Street—which, to Freedman’s point, line an area where many offices have “for lease” signs posted out front.
Other developers are also betting on rental housing, just a few years after some of them seemed caught up in the condominium mania of the moment. Last year RMS Construction completed a condo project with eight townhouse-style units for sale at 2023 Summer Street. Yet this year it is switching gears with The Blvd, a ninety-four-unit apartment development on Washington Boulevard near Broad Street, where tenants are to start moving in this month.
Though RMS’s condos on Summer Street sold reasonably fast, within months, the slower sales pace at high-end condo projects like Trump Parc and Highgrove suggests that the demand for homes in town hasn’t yet hit its stride, says Randy Salvatore, RMS’s owner and principal.
Still, he seems to be making a play for those who like condo-type finishes all the same: The Blvd will have bamboo floors, stainless steel counters, walk-in closets and architectural track lighting. “It will be a really cool, very hip building,” says Salvatore, adding that its proximity to the nightlife of Bedford Street, a short stroll away, will also be draw.
That walkability factor to restaurants seems to have caught the attention of other rental developers as well. The long-empty plot across from The Blvd, which was slated for the City Place condo complex in 2006, will welcome Canaan Lofts next spring; it will have 120 one- and two-bedroom apartments, some in loft configurations, says Salvatore Campofranco, a principal of Canaan Real Estate Investments, the Wilton-based developer behind the project. (Campofranco’s business partner, Samuel B. Fuller, may know something about Stamford’s rental market; he helped develop Stamford’s Avalon Grove, a downtown mainstay.)
Also on Washington Boulevard, the city recently approved a plan from South Norwalk–based Greenfield Partners to put up a new 350-apartment complex where headquarters for The Advocate once stood.
If one landlord was the first to see the tide changing—and capitalize on it—it may have been Seaboard Properties, which in a radical reworking of its business model dumped most of its office portfolio in the face of the recession, in favor of residences. Indeed, in 2007 the Stamford-based company sold most of its commercial properties, including Stamford Landing and 600 Summer Street, while converting 100 Prospect Street, an office building, into ninety-four apartments.
Today the occupancy level in that building and others is about 100 percent, says Meredith DiMenna, Seaboard’s marketing manager. “We really had a sense this was coming,” she adds.
In addition, the company offers several dozen units as short-term corporate housing, furnished and ready for executives who might need to stay in Stamford to, say, shoot a movie. “In a climate where you’re not always sure if you can lock in tenants,” DiMenna explains, “you kind of do this as a backup.”
Rentals, where revenue trickles in over time, don’t usually let developers bail on projects speedily, so rental buildings generally favor builders with little debt and deep pockets. Those advantages may be helping Building and Land Technology add a number of rental buildings across the South End, what might be the biggest rental story of the year.
In the dramatically recast neighborhood, the Lofts at Yale & Towne on Henry Street, which faces a line of multifamily homes in an area still scarce with amenities, nevertheless managed to completely lease all 225 of its apartments in just four months, says Carl Kuehner, BLT’s chief executive.
One bedrooms in the tall brick building that was once the Yale & Towne lock factory average $1,800 a month, he adds.
Next up? BLT is focused on 101 Park Place, a cream-colored modern highrise that’s part of the sweeping Harbor Point project. By January it had leased about a quarter of its 336 units.
While plans for a BLT condo on a nearby stretch of the new Mill River Park are on ice for now, the city has finally given the green light to the company’s controversial Gateway complex by the train station, where dump trucks rumbling by signaled activity on the site one recent afternoon; its two office towers are to be joined by thirty-seven apartments. “Everybody likes to move into something new,” Kuehner says, “and help create a neighborhood.”
The Larger Picture
While rentals appear in full gallop downtown, ambling might be a better way to describe the city’s overall housing market, even if the numbers might not suggest it at first.
In 2010 there were 989 sales of single- family, multifamily, and condo dwellings in Stamford, up from 802 in 2009, which seems to be a significant improvement. Average prices, too, picked up, to about $700,000 last year from $666,000 in 2009, listings data shows. But these upticks are skewed by a few big-ticket sales, says Rob Vannucchi, director of sales for William Pitt Sotheby’s International Realty. Besides, he explains, much of the bounce in activity can be attributed to the first-time homebuyer’s tax credit, which expired at the end of June.
If you examine the sales of certain properties over a longer time span, he adds, a decline in values is painfully apparent. For instance, on Shippan Point, 2010 saw big deals, like a seven-bedroom house with water views trading for $2.8 million. But considering that the seller had bought the colonial in 2005 for $2.9 million and then spent $500,000 in an attic-to-basement renovation, the sale should be considered a major loss, Vannucchi says.
Additionally, a Westover mansion that sold for $3.4 million in 2008, before it was foreclosed shortly thereafter, was purchased from the lender in February 2010 for $1.675 million, less than half its prior cost. “2010 was better than 2009 on paper, maybe,” Vannucchi says, “but we were looking for a landslide improvement and didn’t get it.”
Other problems in the luxury market have roiled two of the city’s newer condos, Trump Parc and Highgrove.
Highgrove, with ninety-five units designed by Robert A.M. Stern, has been plagued by delays and is still unable to move in anyone even though developer Ceebraid-Signal Corporation started signing contracts in 2004. Some buyers are now trying to get their deposits refunded. Jason Schlesinger, a Ceebraid principal, did not return a call for comment.
Some buyers have also asked for their money back at Trump Parc, according to Tom Rich, president of the F. D. Rich Company, which built the thirty-four-story tower where the least expensive apartment, a one-bedroom, is now $565,000. Indeed, in July Rich had sold 60 of the building’s 166 units, but by December that number had dropped to 50, he says.
But, Rich adds, Trump Parc is now signing about a contract a week, a pace spurred on by unusual incentive programs, like loaning buyers 20 percent of the price as a second mortgage. And since no lenders are involved—Rich owns the building outright—he can afford to wait out the bad times. “It’s clearly not going to be as profitable as we hoped,” he says, “but on the other hand, we are proud of the accomplishment.”
Buyers in glassy skyscrapers and seaside estates aren’t the only ones with money concerns. In Glenbrook, Springdale and the Cove, some residents have had trouble keeping up with mortgage payments, forcing many homes back onto the market as short sales or foreclosures; together they represent 15 percent of the for-sale homes in those areas, brokers say. And because these properties are often steeply discounted, they tend to drag down values around them.
In fact, all things being equal, banks in general seem more willing to go after these types of homes because they can be resold at less of a loss, says Ronald Malloy, also a Sotheby’s broker. “When a home is worth $1 million or $2 million, the bank doesn’t really want that house, because they’re going to end up selling it at an auction for ten cents on the dollar,” Malloy says. “They would rather make an agreement with the owners to continue to pay rents.”
There is, however, cause for optimism this year, says Melanie Healey, owner of Stamford-based Newbridge International Realty. For one, banks seemed more willing to open their purse strings to lend as 2010 ended. Also there’s more parity in the market: sellers are becoming more realistic and putting their homes on the market at lower prices, she explains, while it’s dawning on buyers that the fire sale is over.
Most important, consumer confidence is on the upswing in ways that are almost palpable, Healy says. “You can feel it; people are comfortable buying again,” she adds, noting that one of her buyers recently paid $25,000 over asking price for a Stamford listing.
Many commercial properties struggled last year. The vacancy rate for the city as a whole in this category, which stretches from High Ridge Corporate Park to Pitney Bowes on Elmcroft Road, was 23 percent in the fourth quarter, according to real estate services firm CB Richard Ellis, about the same level for the same period in 2009.
But, brokers point out, square footage was increased by Harbor Point. And, they add, almost 5 percent of the vacancy total is accounted for by one property, 695 East Main Street, which is the empty four-building complex once owned by now-defunct Lehman Brothers.
Commercial rents were also treading water last year. The average asking price for all office space at the end of the year was $41 a foot in the fourth quarter, the same as in 2009.
That said, there were bright spots in commercial leasing activity, brokers say, many of them centered around BLT’s Harbor Point, which presents some of the first speculative office towers Stamford has seen in years. By way of example, consider McKinsey & Company, which will move from downtown to 2 Harbor Point Square, and Louis Dreyfus Highbridge Energy which will move from Wilton to 1 Harbor Point Square. The ribbons for both weren’t even cut when the deals closed.
At the same time, Fairway opened last fall in a BLT building, near where the furnishings company Design Within Reach is about to relocate its headquarters from San Francisco. Yet Starwood Hotels doesn’t arrive at 333 Ludlow Street, an older BLT property, until 2012.
“There were skeptics about this project, about extending downtown into the South End,” says Bob Caruso, a senior managing director with CB Richard Ellis, who was involved in some of the deals, “but they are being proven wrong.”
The true bellwether of the economy, however, is probably the housing market, whose collapse kicked off the recession in the first place. Even Mayor Michael Pavia is keeping an eye on it, for somewhat personal reasons. In September he listed his three-bedroom Davenport Farms colonial for $1.295 million. At press time it still hadn’t sold.
“The market is slower than I anticipated, in terms of that house in that price range,” says Pavia. “But I am optimistic that as we approach spring, we will see better activity.”