What’s next for Norwalk’s commercial property market?
The state of economic development in Norwalk was the focus of a recent event at the SoNo Collection that was hosted by the Greater Norwalk Chamber of Commerce in association with the Westport-Weston Chamber of Commerce and sponsored by FLB Law.
Eric Bernheim, a managing partner at FLB Law, served as the panel moderator and was joined on stage by John Hannigan, a principal at the real estate brokerage Choyce Peterson. Danielle Dobin and Steve Kleppin, the heads of planning and zoning for Westport and Norwalk, respectively, were also in attendance, along with Kim Morque, president and principal of Spinnaker Real Estate Partners, and Alan Webber, chief financial officer at M.F. DiScala & Co.
Brenheim began the conversation by stating his pride in playing a role in the construction of the SoNo Collection itself.
“I was special counsel to the city of Norwalk for the SoNo Collection,” he said. “We assisted them in turning what was a vacant piece of contaminated land for a couple of decades into the fabulous building that we’re all enjoying now.”
Brenheim pointed out that there are also more industrial businesses that rely on the area’s real estate, such as the oystering companies, that own thousands of acres of farming grounds along the coast that serve as the foundation for the annual Norwalk Oyster Festival. He urged attendees to think about the future of real estate in the region as being more than one thing.
Brenheim’s first question was to Kleppin, asking him to describe the efforts taken by his department to accomplish the economic growth Norwalk has seen.
Kleppin recalled that he started his current role in 2016 when the SoNo Collection was still in the planning phase, which was also when the city’s plan of conservation and development was on the verge of expiring. The result was the need to hit the ground running, but it quickly revealed to him the importance of proactive zoning approaches.
“If anybody has ever looked at Norwalk zoning regulations,” Kleppin added, “you don’t need to look much further than the surface to understand that they’re really complex. They were very piecemeal when they were put together and haven’t had a complete overhaul in 30 years.”
Klepping stated there was a need for an updated zoning law, which emulated what Stamford explored recently, with multifamily and commercial zones to help grow the city and not just in the downtown core.
Dobin was asked about efforts to expand economic opportunity in Westport and explained her efforts to change regulations that barred much of the development now earned praise in the town’s core.
“There was an idea for a long time I call the ‘Disneyfication’ of Westport,” Dobin said. “There was support for preserving Westport in amber like some sort of historical artifact, like we were Nantucket. But we’re not Nantucket, we are part of the ecosystem of Connecticut and a lot of what the commission has tried to accomplish recently has been to change our regulations to become more flexible.”
Webber was asked about that industrial side of the commercial real estate equation and he described a situation not dissimilar to that of the rest of the sector. He pointed to his firm’s properties in California where vacancy rates are less than 1% while rents have risen more than 50%. At the same time, he noted with industrial real estate “it’s an easy product to manage from an ownership standpoint. The tenants tend to take care of the space, there’s not a lot of maintenance and repairs to do.”
“We really feel that industrial is going to continue to be a big part of our portfolio,” Webber added, noting that much of this demand was driven by the recent shocks to the supply chain, which have caused warehousing to become more attractive for many businesses since the cost of having products on hand was competitive with the risk of losing business due to unreliable shipping.
Hannigan was asked for his thoughts on how the rise of flex space and hybrid office models have shaped the market. He said that it seemed like an exciting opportunity for landlords to hook small tenants in growing companies who might bring an increasing team.
“Hopefully they take a three-or four-person office and, boom, expand and then they’re 10, 12, 15 people,” Hannigan said.
Bernheim then noted that Fairfield County saw 17,000 changes of address in the past year and noted that “If you ask anybody not in the real estate industry, they’ll say there’s too many apartments in Norwalk.”
Morque recalled that at the start of the pandemic his company anticipated turmoil with rising vacancies and delinquencies, but instead the market provided the exact opposite, largely driven by remote workers relocating from New York City.
“We built around 700 units in the last three years,” Morque noted, “and we leased them up very quickly, much faster than we anticipated. So, are there too many? We keep expecting that there’ll be an inflection point and some change, but we haven’t seen it yet.”