STARTUP SAVES ON OFFICE SPACE
Tom Fiorita knows about the massive changes in everyday life spurred by the pandemic, with his Point Pickup Technologies overseeing same-day delivery by 250,000 drivers for packages shipped to homes and businesses.
When it came time to consider a new home for Point Pickup, there was no change in Fiorita’s preference for a traditional office — even as many workplaces in Connecticut remain staffed with skeleton crews as workers wait on their first crack to get inoculated against COVID-19.
In moving its headquarters late last year to Stamford from Greenwich, Point Pickup took a sublease for 17,000 square feet of space at 333 Ludlow Ave. Sublease deals typically offer a discount to regular lease rates in buildings, with master tenants willing to eat a portion of the rent they pay to extract themselves from unused space.
There was plenty to go around last year in Connecticut and nationally, as workers stayed home to contain the spread of coronavirus. With new strains of the virus now circulating thought to be far more contagious — and vaccine distribution still a work in progress — some companies are pushing back decisions on expiring leases in the coming 18 months as they assess productivity and any savings or costs as a result of remote work, according to Jim Fagan, executive managing director in the Stamford office of commercial brokerage firm Cushman & Wakefield.
“We’re in the middle of an experiment that we haven’t fully seen the results,” Fagan said. “It may take three or four years for everything to get figured out. I do think that probably there are going to be a fair number of people who aren’t going to be in the office five days a week.”
That had many office tenants floating space for sublease last year, with transactions shooting up 20 percent according to Cushman & Wakefield.
As tracked by Cushman & Wakefield, three of the four largest lease deals in Fairfield County between October and December were on sublease agreements from existing office tenants in Stamford, with insurer Ascot Group and industrial conglomerate ITT taking 24,000 square feet each respectively at 200 Elm St. and 100 Washington Boulevard.
Across all transactions, companies leased 1.5 million square feet of space in Fairfield County last year, down 700,000 square feet from 2019 or 31 percent. The county’s vacancy rate rose to 29.7 percent from 28.4 percent a year ago, with Stamford and Norwalk at about 35 percent and Danbury’s vacancy rate slightly higher. Greenwich’s vacancy rate was 17 percent at year end, well above Manhattan’s 11 percent rate.
Despite the uncertain outlook for getting new tenants, office building owners increased their asking rates slightly on average in Fairfield County, Cushman & Wakefield calculated. That was counter to the trend in Manhattan, with rents coming down a tick compared to 12 months earlier.
Fiorita founded Point Pickup in 2015, with business now booming as the company lines up drivers to deliver same-day orders for Walmart, Fresh Direct and Albertson’s among others. The company has nearly 200 employees in Connecticut today and another 50 elsewhere. With hiring continuing, the company needed far more space than its previous office could accommodate on Greenwich Avenue in Greenwich.
Point Pickup’s new home at 333 Ludlow had one of the largest sublease availabilities in years. After Marriott International acquired Starwood Hotels & Resorts Worldwide in 2016, Starwood had more than 2,000 workers at its Stamford headquarters, with Marriott shifting some of that work to its own headquarters in Bethesda, Md.
While Point Pickup workers went remote last spring, Fiorita said that he never considered having that become permanent, saying face-to-face collaboration is extraordinarily important at a startup. Fiorita estimates Point Pickup was able to save 20 percent to 30 percent on what it might have gotten for a direct lease on an equivalent space and associated costs.
“I looked at a lot of [buildings in] Stamford, I looked at Norwalk, I looked at Greenwich,” Fiorita said. “The beauty about the [subleases] in many instances is they come furnished . ... I didn’t bring one piece of furniture — for a startup, that’s a lot of savings.”
Office landlords will generally offer discounts on base rent as a last resort, Fagan said, preferring to give away a set number of months of free rent as one alternative.
“When you look at Stamford and Greenwich, [asking] rents are remarkably resilient for how long and how soft the market’s been,” Fagan said. “If you could lower your rent and say, ‘I’m now going to have a full building when nobody else does’ — that would be a really good scenario. The question is if you do lower your rent and you don’t increase ... your tenancy, you haven’t helped yourself — in fact, you might have hurt yourself.”