Greenwich draws NYC firms seeking offices post-pandemic

New York

THE droves of New Yorkers who decamped to the affluent suburb of Greenwich during the pandemic now face the prospect of going back to the office - and some companies are betting that they want to stick close by.

Office demand is soaring in the Connecticut town, pushing rents higher and sparking bidding wars for the best spaces, brokers say. Finance firms including Elliott Management and Apollo Global Management have opened locations or are looking to expand to the area, long known as a hedge-fund capital and haven for Wall Street executives.

"We believe in the next few months there will be very little opportunity left to lease spaces in the central business district of Greenwich," said David Block, an executive vice-president at brokerage CBRE Group in nearby Stamford.

It is a sign of employers adjusting to a new reality after the pandemic fuelled a rush of demand for bigger houses outside of New York. The median single-family home price in Greenwich, located about 48km north of the city, jumped 31 per cent in the first quarter from a year earlier to US$2.24 million, said appraiser Miller Samuel and brokerage Douglas Elliman Real Estate. And after more than 15 months of remote work, even long-time residents may now want the flexibility of being closer to home.

Office leasing in Greenwich's central business district jumped 312 per cent in Q1 2021 from the previous quarter, to 120,000 square feet (sq ft) - almost triple the five-year quarterly average, said CBRE.

By contrast, lease deals in Manhattan's Midtown and financial district were less than half their pre-pandemic levels.

Greenwich's average asking rents in the central business district rose

3 per cent in Q1 2021 from a year earlier to US$92 per square foot (psf), CBRE said. In midtown Manhattan, asking rents were about US$82 psf.

"With offices opening back up, companies are looking at people that have moved out of the city or those not ready to go back to New York City on a five-day-a-week basis," said James Ritman, an executive vice-president at Newmark in Connecticut. "They've got a lot of principals, senior leadership that live out this way and there's been a bit of an awakening or realisation during Covid that you don't have to be commuting two to three hours a day."

Since the pandemic hit, 54 per cent of the newly leased space in Greenwich went to Manhattan-based companies, said CBRE. That includes agreements with RedBird Capital Partners, founded by former Goldman Sachs Group partner Gerry Cardinale, and iCapital Network, a fintech platform.

While Greenwich has long been known for its hedge funds, it is seeing increased interest from asset managers and private equity firms, Mr Ritman said. Apollo, which is keeping its Manhattan headquarters, is opening an office in the town to attract and retain workers outside of the city, a spokesperson said last month. The firm has said it is testing partial remote work until the end of the year.

Greenwich is a tiny market, making most lease deals relatively small and of little impact to New York. CBRE estimates that the suburb's central business district has roughly 2 million sq ft of rentable offices. That is about the size of Goldman Sachs Group's headquarters in lower Manhattan.

With the tight supply, the vacancy rate in Greenwich's main office area is at 11 per cent, less than the 25 per cent average in its home of Fairfield County. But there are pending deals that will likely close by the end of the year, resulting in "almost zero vacancy in downtown Greenwich", Mr Ritman said.

New York firms are testing the waters with shorter leases - roughly three years - to see how the return-to-work strategy evolves, CBRE said. And for now, deals are mostly confined to smaller companies rather than big banks eyeing suburban outposts.

"Some of the larger institutions are starting to think about looking at offices here again, but we haven't seen anybody in that space really step forward and make that commitment yet," Mr Block said.

"Everyone's trying to figure out what it looks like post-pandemic." BLOOMBERG