New York or Connecticut – the debate rages
New York or Connecticut? The great US debate rages
Two Connecticut towns are home to a growing number of maritime outfits but some have found good reasons to stay loyal to New York.
In the greater New York area, location choices once were driven largely by cost factors like rental rates and taxation, but increasingly they are being influenced by companies’ preference to find space closer to where their employees and principals live. A recent trend, for instance, has seen companies migrating eastward in Connecticut’s Fairfield County.
Probably no shipping man in the area knows more about real estate than Charles Mallory, a founding partner of tanker broker MJLF who is retired from the brokerage but still works on realty projects.
Shipowners once focussed almost exclusively on New York City as a maritime centre until the 1980s, when Stolt-Nielsen and Ole Skaarup set up shop in the Greenwich-Stamford area. Fairfield County offered cheaper space and Connecticut at the time still had no personal income tax.
Stolt-Nielsen and Skaarup were high-profile figures, so others noticed and followed and MJLF was one of those in 1988. At that time, Mallory was the only partner not residing in Connecticut. Other brokerages like Dietze and John F Dillon already had offices in Fairfield County.
“One thing led to another,” Mallory said. “A piece of real estate in New York was significantly higher, and a lot of people already were living in Connecticut. After a while, there was a critical mass and it just fed on itself.”
Office prices between midtown Manhattan and Fairfield County remain “significantly different — it’s half price or less,” Mallory said.
One factor is the glut of available office space in Fairfield County in the aftermath of the economic collapse.
One exception in Connecticut is downtown Greenwich, where prices can rival Manhattan. Shipowners there are also competing with the herd of hedge funds that have made Greenwich their home.
But prices get cheaper again for the increasing number of companies who are setting up in Norwalk or towns to the east like Westport and Fairfield.
“Shipping is spreading east in Fairfield County,” Mallory said. “It’s a function of slightly more affordable rents in that part of the world, but also I think a lot of people live further to the east and don’t want to battle the highway traffic that can be so difficult in the region on a commute to Stamford or Greenwich.”
Former Heidmar president Tim Brennan has seen that trend personally. The former Heidenreich Marine moved twice during his tenure there, first from Greenwich to Darien (a hedge fund paid them to vacate the Greenwich space in 2000), and then on to Norwalk in 2007.
“We had a lot of employees who lived in the Norwalk-Fairfield area, and it made a big difference in their commute,” Brennan said. “It improved employees’ quality of life.”
Fairfield and neighbouring Westport are home to a growing number of maritime companies, including Penfield Marine, Chembulk, suezmax owner Principal Maritime led by Fairfielder Art Regan, Tankship International, MTM, Navig8 and a number of maritime lawyers.
Staying true to New York
Some, however, will always find a reason to stay loyal to New York. Companies like Overseas Shipholding Group (OSG) and broker Poten & Partners have been there for decades, while newer entries have been the likes of the Peter Georgiopoulos companies (General Maritime, Genco Shipping & Trading, Baltic Trading and Aegean Marine Petroleum) and dry owner Eagle Bulk. In the latter cases, it is likely no coincidence that the principals (Georgipoulos and Sophocles Zoullas) are New Yorkers.
“There are a lot of advantages to being in New York because the entire shipping world comes to New York,” said a source close to Genmar. “It’s easier for investors to pop in. We just think there are enough benefits to being here to offset what may be a higher cost.”
With that said, he indicates Genmar is paying a below-market rate for its prime Park Avenue real estate at about $50 per square foot under an old lease. Comparable space in the neighborhood goes for as high as $90, he says. Genmar moved in during 2005 and is believed to have the space until 2018. The rent it currently pays is more akin to companies that have set up in downtown Manhattan, the source says.
Craig Johnson, a partner at US maritime recruitment firm Flagship Management, says salaries in shipping are on the increase, despite relatively high unemployment elsewhere in the US labour market.
“The rates on the ships haven’t gone up, that’s the part that makes it tough, so people are hiring fewer people. They’re hiring more rounded people and paying them more money, and making them do more work.”
Johnson says the Fairfield County and New York shipping cluster’s rising staffing costs are a result of an increasing shortage of the specific skill sets required for a shipping business.
“Younger folks fresh out of school don’t go out to sea anymore,” he said. “To get folks that have been out to sea for four or five years and have them come ashore is still pretty tough. We have to make twice as many phone calls as we did four years ago to find one person.”
He also notes that it is hard to persuade those in the shipping industry who have found jobs on the Gulf Coast to come back to the north-east, where the cost of living is much higher.
Tradewinds.no 30 January 2013, 08:36 GMT