1. CT Commercial Real Estate Conference
An Overview of Office Values in Fairfield County
Jeffrey H. Gage
Competitive Real Estate Strategies

2. Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies
Agenda
Market Overview
Vacancy Analysis
Value Analysis
What the future brings
Questions & Discussions
Send me your for a copy of the link to the statistics
Jeffrey H. Gage Competitive Real Estate Strategies

3. Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies
Here is my
Jeffrey H. Gage Competitive Real Estate Strategies

4. Summary of the Statistics Data Provided by Jones Lang LaSalle
2008
2009
Change
Total Inventory
Class A Space
34,539,489
34,898,100
1.038%
Class B Space
9,427,418
0.000%
Available Space
Class A Available
4,591,056
7,245,187
57.811%
Class B Available
2,094,607
2,426,044
15.823%
Vacancy Rate
13.300%
20.800%
56.391%
22.200%
25.700%
15.766%
Asking Prices $ $
-2.018% $ $
-4.251%
Gross Leasing
846,629
474,099
1,320,728
Jeffrey H. Gage Competitive Real Estate Strategies

5. Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies
So what’s happening?
There is not as much gross leasing activity
1.2 mm sq. ft. vs mm sq. ft.
There is plenty of new space on the market
Speculative development
Renovated development
Tenants are staying where they are
Jeffrey H. Gage Competitive Real Estate Strategies

6. Why is demand off? Leases still expire 5-10 yrs.
10% of the market should be in play for a move each year
Tenants have no confidence in their businesses
Employment is down, so few companies are expanding
Technology is supporting the virtual office environment
Higher operating efficiency
Jeffrey H. Gage Competitive Real Estate Strategies

7. What were/are the significant deals?
GeRe leaves 695 East Main Street empty
Purdue Pharma subleases back space it leased to UBS in the Purdue building
Sun Products purchases the Unilever soap products line and relocates to Wilton
UBS holds onto space it had on the market for sublease
Starwood is looking to come to CT
GE continues to shrink and consolidate
Hospitals take more space
Jeffrey H. Gage Competitive Real Estate Strategies

8. Value = f(net rent, leverage, return on equity)
Net rents are trending down
Loan to value ratios are trending down
Interest rates are trending up
Cap rates are trending up
Equity is sitting on the sideline……waiting for higher returns
Jeffrey H. Gage Competitive Real Estate Strategies

9. Components of Gross Net
Jeffrey H. Gage Competitive Real Estate Strategies

10. Market shift in value comparison
Two Years Ago
This Year
Jeffrey H. Gage Competitive Real Estate Strategies

11. Market shift in value comparison (cont.)
Jeffrey H. Gage Competitive Real Estate Strategies

12. Why are net rents trending down?
Demand is down
There is not much movement in the market
Tenants are staying put
Short term renewals
Companies are not in a growth mode
Buildings with above market rents can afford to drop prices
The buildings that have space want to fill it
Concessions are high
Effective rents are lower
Jeffrey H. Gage Competitive Real Estate Strategies

13. Real question from a landlord
Question: Where should I be making deals on my empty space? Answer: 20% less than what you would do to keep a tenant Why?... “That’s what other landlords are doing to take your tenants away and that’s what you need to do to take theirs.”
Jeffrey H. Gage Competitive Real Estate Strategies

14. What is different about this time vs. last time?
There is little new development and no overbuilding
Rents were in a steep incline before the drop
Some property was selling at above replacement cost
Other property was selling based on speculative income
Values were escalated without regard to basic fundamentals
Jeffrey H. Gage Competitive Real Estate Strategies

15. Projections/Conclusions
More space will come on the market
Prices will continue to drop
The good stuff will lease first
Buildings will trade at a discount to replacement cost until supply diminishes
Rents will stabilize at a number that justifies new construction, 9-11% cap on cost.
Jeffrey H. Gage Competitive Real Estate Strategies

16. Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies
Special Thanks to
Jovani Rampersad and Stacey Cassidy who helped with the Statistics
Jones Lang LaSalle who kept an open mind
Glen Larson UCONN MBA who fixed my slides!
Thank you for your participation in today's events!!
Jeffrey H. Gage Competitive Real Estate Strategies