Nationally based tenants have been shying away from tertiary retail markets in the first quarter of 2003, leaving brokers like C.A. White – which owns this empty storefront property at the corner of Church and Chapel streets in downtown New Haven – to keep spaces vacant until the economy turns around. This rendering shows how the space will appear following current renovations.

During the last 12 months, national retail tenants have showed a hesitancy to move into downtown New Haven, but industry insiders are optimistic that business will soon pick up, while others report business as usual in the suburbs.

Frank Micali, vice president of the Commercial Division at C.A. White in New Haven, said he is hopeful the retail market will turn around over the course of the next year. He was quick to point out, however, that the market isn’t necessarily that bad.

Asked how the overall retail market appears to be doing this year, Micali said, “I don’t think the year has anything to do with it. The retail market in New Haven is about as stable as it can be for the economic times that we’re in.”

He added, “Retailers are choosing very carefully where they go, and that goes for anywhere – whether it’s A, B or C class space. Tertiary and secondary markets are seeing the most reluctance for new stores, but as the economy goes up, Wall Street will make the national chains open up some more stores.”

According to Micali, most of the retail activity in the central business district has been from so-called “mom and pop” outfits. However, he believes New Haven is poised to see change for the last two quarters of 2003.

“You’re going to start hearing some announcements, especially in the [city’s nearly vacant] mall,” he said.

Micali said non-national tenants have been very strong in the New Haven marketplace and are trying to get into retail spaces. However, national tenants have been shying away from the tertiary retail markets, including New Haven’s central business district.

The New Haven Mall has experienced difficulty obtaining major national chains. Micali attributes the hesitancy on behalf of national tenants to the economy.

“This area is having a real tough time inking national tenants and I have to believe 90 percent of that has to be because of the economy. Retailers really are reluctant to move into tertiary markets right now,” said Micali. “I’m hoping now that the war [in Iraq] is over, things might get back on track as far as national tenants go.”

He noted that in New Haven’s central business district, the mall is the major retail space, in addition to a few blocks on Chapel Street where several longtime tenants are located. C.A. White is currently renovating retail space at the corner of Church and Chapel streets.

The space holds 17,000 square feet of space that C.A. White isn’t yet sure how to split up.

“We’re being very patient because we’re converting the rest of the building from office space into 125 units of residential. It’s easier to keep the space vacant and hope the economy gets better by the time the building will actually be done,” said Micali. “We’re looking for the right national tenant who wants this kind of exposure.”

One area of New Haven’s retail sector that is doing well is restaurants.

“There is definitely a lot of activity in restaurants, and I believe there are six pipeline restaurants in the making right now in downtown New Haven that will be completed over the next six months,” said Micali.

‘Very Encouraging’

Because of the city’s emerging arts and theater market, several new restaurants have moved into downtown looking to take advantage of the evening crowds. A few of the eateries cater to high-end clients as well.

Micali noted that Bentara, a popular Asian-fusion restaurant on Orange Street has been popular enough to encourage the owner to open another restaurant in a second location.

“Orange Street doesn’t even have that great visibility,” said Micali, noting that the theater-going crowd has been able to support several of the recent eateries. “That a restaurateur in New Haven can do two stores that are both high-end concepts is very encouraging.”

He noted that of the eight or nine restaurants that have opened up shop over the last five years, only a couple of them have since closed. There are a few buildings, he added, that seem to host three or four restaurants in just a few years that may be poor locations for eateries.

“Some of these spaces just get refilled with restaurants again and again,” said Micali, citing the Colony Hotel on Upper Chapel Street as an example. Currently, two restaurateurs from New York City, who formerly operated a restaurant that was destroyed during the terrorist attacks on Sept. 11, 2001, are working to open a new eatery.

“This will be the third restaurant in that location in the last five years, but this time the excuse won’t be the operator. I’m going to be keeping watch to see how well they do because I’m sure they know how to run a restaurant. It’ll be the location that will be the issue,” said Micali.

Clothing retailers appear to be having difficulty in the city’s downtown. Aside from a handful of boutique clothing spaces that always have been performers on Chapel Street, the tertiary market has had difficulty attracting major clothing stores.

Micali’s outfit operates an Ashley Stewart store, which is part of a regional women’s clothing chain based in New Jersey that he reports is “doing OK.”

“Location is everything,” he said. “New Haven is very particular from block to block. You can go north one or two blocks and it’s a totally different ballgame. So knowing where to open your store is very important.”

The difference isn’t just in foot traffic or exposure; it’s also approximately $13 per square foot. In the central business district, rents are about $25 per square foot, whereas just a few blocks a way rents drop down to $12 per square foot.

“There are some places where you can go one block and see rents drop 15 bucks a foot,” he said.

While national tenants may be shying away from New Haven’s central business district, several of the outlying towns have been enjoying steady retail activity.

Steve Patton, principal of Proto Group Commercial Real Estate Services in North Haven, noted that the retail market in the suburbs of New Haven has enjoyed a decent amount of activity.

“The first quarter of 2003 has been pretty active despite the war and downed economy,” said Patton. “We’ve been leasing strip center, fast food restaurants, drug stores, grocery stores – you name it. Nothing’s changed for us.”

The Proto Group recently brokered several deals throughout the area, including long-term leases and subleases with national chains such as Rite Aid Stores, Wendy’s Old-Fashioned Hamburgers and Quizno’s Subs. Proto has been named exclusive broker for the Denver-based Quizno’s for Connecticut and Western Massachusetts. According to Patton, the chain is expected to open 100 units in the two states over the next three to four years.

Proto also has had recent dealings with non-national tenants. Those include Tommy K’s Video, which recently signed a lease to relocate its Ansonia video store to the new Shop Rite Plaza in Derby. According to Patton, that move will pave the way for CVS Pharmacy to expand its Ansonia store. Tommy K’s will occupy 5,000 square feet of space with a lease value in excess of $300,000.

Patton added that retailers have been selling as well as leasing. His group recently brokered the sale of the former Westbrook Nursery and Garden Center on Waterbury Road in Cheshire, a five-and-a half-acre property that was acquired for $400,000.