TOM HILL – Waterbury ‘hot’

While the Waterbury area saw continued positive effects last year from political shakeups in 2001, Hartford-area commercial real estate brokers seemed satisfied with activity that increased slowly but steadily in 2003.

A changing of the political guard in Waterbury is still positively affecting the commercial real estate market in the area, two-and-a-half years after the state took over the finances of the city – which was formerly troubled by corruption – and the area’s respected state Rep. Michael Jarjura became mayor.

“Waterbury’s been hot as a pistol,” said Coldwell Banker Scalzo-Tom Hill Group Vice President Tom Hill.

Since those changes took place, Waterbury has been operating more like a business – and companies have noticed, Hill said.

“Once investors all over the state saw the city was going to be run like a business [they wanted to come here],” he said.

The initial interest in the newly reformed city that started two-and-a-half years ago hasn’t waned, Hill said. Waterbury – which is located in the northern section of New Haven County and is the regional hub in the area – and the towns around it continue to see commercial real estate activity, with business becoming even better last year, Hill said.

“A whole bunch of buildings turned over [in 2003],” he said.

The city, which has a population of about 107,000, was the site of new construction and building turnover last year. Much of the business has centered around retail, investment properties and apartment complexes, Hill said. Several drugstores, including Walgreens and CVS Pharmacy, have moved into the area and some small manufacturers have bought vacant factories, Hill said. There were also two big deals last year: A redeveloped mall was sold to a Midwestern real estate investment firm for $52 million and Coldwell Banker brokered the sale of the PetsMart and Sports Authority building for $10.7 million, Hill noted.

Also last year, the Burlington Coat Factory leased space at the Brass Mill Center, a 1.1 million-square-foot mall near Waterbury’s downtown area, becoming the mall’s fourth anchor store.

Just outside of Waterbury, active-adult communities are popping up. Hill’s group represents a 170-unit project in Middlebury. There is also another large community planned for Oxford, according to Hill.

“If interest rates stay stable … I think you’ll still see people putting money in real estate,” Hill said.

One draw to Waterbury is that, because of the city’s checkered past, developing there pays high returns because of the risk involved, Hill said.

Although retail and apartment properties are thriving, and although several manufacturers have made deals in the last year, manufacturing is the weakest area in commercial real estate for the Waterbury region, Hill added.

“The manufacturing guys are having trouble,” he said.

‘A Good Run’

Office buildings and retail space also saw the most activity in the Hartford area.

Bruce Cagenello, a broker at Prudential Connecticut Realty in Avon and chairman of the Connecticut Real Estate Commission, saw a small increase in activity from 2002 to 2003.

“Last year was about the same as the year before. A little better,” he said.

Farmington Valley – which is made up of Farmington, Avon and several other towns to the west of Hartford – had a fair amount of business in 2003, Cagenello said. But Farmington itself had a little more space on the market than brokers would have liked to see.

“Generally speaking, we’re able to put a lot of people in properties,” Cagenello said.

One trend he noticed last year was that, overall, there were more buyers or leasers than available property. Brokers at his firm called property owners to see if they were thinking of selling.

Continuing low interest rates on mortgages contribute to that trend, Cagenello said.

John McCormick, executive vice president of CB Richard Ellis in Hartford, also saw increased demand in 2003. The last part of the year was much better than the previous two quarters, he said.

“From our standpoint, the fourth quarter showed increased demand,” McCormick said. “It was really dramatic.”

McCormick hopes the demand will lead to positive absorption in 2004.

Cagenello also noticed increased activity in the fourth quarter, he said.

“It’s been a good run,” he said.

But Cagenello didn’t want to attribute that to increased activity at the end of the year because many of the deals the brokers worked on throughout the year closed in the fourth quarter, he said.

Much of the increased demand Cagenello noticed came from professionals such as doctors and lawyers who were looking for office space. But Cagenello’s firm works with a variety of buyers and leasers, he said.

“It varies with us,” he said. “It really is a mix.”

Brokers at Cagenello’s firm also have worked with insurance companies, exercise facilities, daycare providers and a furniture maker, he said.

McCormick, who estimated CB Richard Ellis does about half its business in downtown Hartford and half in the suburbs, said the firm also has helped place many companies into new offices. Last year, Magellan Health, a national behavioral health and employee assistance company, moved its headquarters from Columbia, Md., to Farmington and Aspen Re, a reinsurance company, moved offices to Rocky Hill.

Both Cagenello and McCormick hope business continues to increase in 2004.

Because the Hartford commercial real estate market depends heavily on financial services companies, the stock market has an impact on the area, McCormick said. The terrorist attacks of Sept. 11, 2001, did not change the market much, but the ensuing difficulties in the stock market did. And since 2004 has been rife with acquisitions and mergers between banks and financial services companies, commercial real estate brokers may notice a difference in activity this year, McCormick said. Deals such the sale of Hartford-based CIGNA’s retirement services to Prudential Financial, he noted, could result in area job losses and have an impact on commercial real estate in the months to come.

“We’re not sure how that’s going to impact things going forward,” McCormick said.

Still, Cagenello said the first quarter of 2004 has started out well for his firm.

“If we can close on everything we’re working on, it’s going to be a gangbuster year,” he said.