Putnam Industrial Park, Putnam

The first quarter of 2004 left commercial real estate agents and brokers optimistic about the market for industrial and warehouse space, but the market for big warehouses and for manufacturing space has diminished.

Tim D’Addabbo, senior director of Cushman & Wakefield’s office in Hartford, has noticed that most of his clients are looking for warehouses rather than manufacturing space.

“Unfortunately, our market has gone away from manufacturing,” he said.

Many former factories have been transformed into multi-tenant warehouses and lots of manufacturing jobs are being shipped overseas, confirmed D’Addabbo. He compared the changes to when companies shipped manufacturing jobs to the southern United States in the 1980s.

“Companies growing in China seems to be the discussion [today],” said D’Addabbo. And Fred Allyn III, a partner at Allyn & Assoc. in Norwich, agreed. “There is just a general lack of demand [for manufacturing space],” believes Allyn.

But Allyn has been successful with one industrial park in northeastern Connecticut. Allyn’s company serves as the brokers for the Putnam Industrial Park, which is owned by the town of Putnam, which offer incentives like tax abatements to tenants.

The park has been so successful that companies from Rhode Island have moved there. “We’ve had success up there,” Allyn said.

Other industrial parks, where the owners aren’t offering the kinds of incentives tenants at the Putnam Industrial Park have access to, aren’t doing as well, believes Allyn. At an industrial park in Norwich, a 26,000-square-foot building has been standing vacant for several years, even though it’s priced right, according to Allyn. “It’s just not moving,” he said.

The owner of a newer industrial space in Groton isn’t having much success, either, Allyn confirmed.

Mike Struna, a broker at Advantage Commercial Realty in Bethel, has also noticed manufacturers leaving, but his company has found success with the recent leasing of 85,000 square feet in Brookfield to Pitney Bowes.

“That’s a big one for Fairfield County,” he said.

The Francis J. Clarke Industrial Park in Bethel has also seen lots of leasing activity, according to Struna. “All the indicators are that activity is pretty strong.”

Most activity Allyn has seen in the last quarter has surrounded smaller-sized warehouses. The sales or leasing of large existing warehouses tends to take a long time, because many companies have been consumed by bigger ones or have consolidated and don’t need new space. But some companies are on the market for space between 3,000 and 7,000 square feet, stated Allyn.

That type of demand has worked for him locally, because many of the spaces available in Norwich are small. But there are few companies in the area that need lots of space, he believes.

“They are few and far between at this point,” Allyn said.

He is hopeful that the warehouse market will be buoyed over the rest of the year.

“I think the warehouse space is going to rebound,” Allyn said.

William Bronson, Jr., vice president of CB Richard Ellis in Hartford, has also seen clients looking for warehouses. “Activity’s definitely picked up,” he said.

Most of his clients have been leasing or buying high-bay distribution space with 24-foot or higher ceilings. Others have been looking for land so they can build to suit, according to Bronson. Bloomfield, Windsor and Windsor Locks have all seen activity over the last quarter.

“It probably has to do with the close proximity to the airport,” Bronson said.

He also attributed the interest to good labor pools in the area.

Many of his clients are logistics companies who need third-party warehousing for their customers, Bronson stated. “It’s more active than in the last quarter and in the last year, in general. I think the economy’s picking up,” he confirmed.

With warehousing, the economy decides how much space businesses need, but the warehouse market is always at least marginally healthy, he said. “Whether it’s a good economy or a bad economy, people still need goods,” Bronson said. “I think it’ll be a good year this year.”

In the Hartford area, some of the most sought after warehouse buildings are scarce, in D’Addabbo’s view. There are not a lot of new, quality buildings that range from 25,000 to 50,000 square feet, which is the size most people are looking to occupy. Prices on those size buildings are going up, but there are still older buildings with lower ceilings and lower quality on the market. And those are the properties taking a long time to lease and sell, according to D’Addabbo.

But D’Addabbo is hopeful the market will improve. So far in 2004, he has seen a lot of “tire kickers.”

“Literally, since the end of summer last year Â… we have seen an increase in activity,” he said.

Many people have been out looking at properties since Labor Day of 2003, he stated. D’Addabbo believes there is more optimism in the market since interest rates have remained low. But there could be another reason, he said.

“I don’t think there’s any specific reason in the Hartford market [why people are looking more],” stated D’Addabbo. And although more people have been looking at property, they haven’t started closing deals yet. “Whether that translates to additional deals, we’ll probably have to wait,” he said. “We’re optimistic with the activity.”

D’Addabbo has also noticed more and more companies buying land. In 2003, there were more land transactions in his area than in the last 10 years combined, according to his figures. But since then, land purchases have slowed, probably because there is little quality land left in the Greater Hartford area.

“The quality land sites Â… have been gobbled up,” D’Addabbo said.

But companies have still been shopping for land in Windsor, Bloomfield and other communities north of Hartford. There are nice corporate areas there and companies have been building new projects there, D’Addabbo said.