New Haven, where this 30,000-square-foot Class B office building is located at 205 Whitney Ave., is one Connecticut city where commercial real estate activity has been somewhat slow in recent days.
Unemployment and an unhealthy commercial real estate market often go hand in hand, but although the number of jobs in Connecticut reached a four-year low this past March, not all commercial real estate agents felt the pinch in the first quarter of the year.
Connecticut’s jobs reached a low of about 1.6 million in March, according to the New England Economic Partnership, a nonprofit economic forecasting organization. Things look a little better for the rest of this year – NEEP predicts about 7,400 new jobs later this year – but the state still lags behind most of New England and the rest of the country.
“Connecticut’s negative job growth has been greater [-3.6 percent] and has lasted longer [June 2000 to April 2004] than that for the United States [-2.1 percent from March 2001 to August 2003],” according to the NEEP report.
Connecticut jobs should start coming back in force in the next couple of years, according to the report. The economic partnership predicts 26,000 new jobs in each of the next two years.
The state’s job count has a direct effect on the commercial real estate market, especially when it comes to office space, according to Bruce Cagenello, commercial broker at Prudential Connecticut Realty in Avon. Commercial real estate agents have noticed the lagging in that area, Cagenello said.
“[Avon’s] vacancy rates are not as low as we’d like to see them,” he said.
Some Success
But in Fairfield County, hot cities like Norwalk continued to do well despite the lack of job growth in the first quarter and helped the county as a whole see some success, according to a report from CB Richard Ellis.
“After more than two years of difficulties brought on by Sept. 11 [2001] and the ensuing economic downturn, Fairfield County finally showed signs of shrugging off its funk in the first quarter of 2004,” the report reads. “Leasing, buoyed by several significant transactions, bounced back to more predictable levels and fewer space returns led to positive absorption and lower availability compared to last year.”
Leasing in the county for the first quarter was 41 percent above the first quarter of 2003, according to the report. The positive change was due to activity in Norwalk and the eastern part of the county. Four of the 10 biggest deals in the county happened in Norwalk, including the finalizing of the Diageo North America lease for 277,700 square feet at 801 Main Ave.
“The Route 7 corridor [in Norwalk], in fact, was the most active office cluster in the county,” according to the report.
The vacancy rate for Class A office space decreased slightly in the first quarter, according to a report from Stamford-based Albert B. Ashforth Inc. The vacancy rate in the last quarter of 2003 was 16.9 percent. That decreased to 16.1 percent for the first quarter of 2004, according to the report.
Stamford, however, continues to be a sore spot for Fairfield County commercial real estate agents. The vacancy rate for Class A office space increased from 15.4 percent in the last quarter of 2003 to 15.7 percent in the first quarter of 2004, according to the Ashforth report.
The Stamford market has been weak in all commercial real estate sectors, according to the CB Richard Ellis report.
“Part of the reason for these disappointing results was not just the general lack of activity in the city, but also the fact that the deals that were closed were unusually small, in contrast to the improvement in deal size countywide,” according to the CB Richard Ellis report.
Activity in the New Haven area also has been slow, said Bill Silverman, a commercial broker with Levey Miller Maretz. But that might not be a product of fewer jobs, Silverman said. It could be the other way around.
“Unfortunately, there is very little land to build on and many of the buildings in the New Haven area are functionally obsolete,” he said.
There also is very little inventory in the New Haven area, he added.
“There’s nothing to sell,” Silverman said.
Some activity has taken place in the retail, restaurant and nightlife industries, but office space continues to be scarce. Most of the available space is Class B and was built in the early 1900s or in the 1960s, Silverman said. As a result, there is little room for companies to grow.
“Where the hell are you going to put [new workers]?” he said.
Silverman hopes that, in the coming years, New Haven’s popularity will draw companies that would normally settle in Bridgeport to the area. But that may not happen for a while, he noted.
“I don’t see any big people moving into the area in the immediate future,” Silverman said.
