The office market in Greater New Haven saw significant success last year. This 32,000-square-foot building at 1291 Boston Post Road in Madison is fully occupied, and developers are breaking ground on more office space there.

Executives tired of fighting traffic and developers remodeling office buildings into apartments were among the players that affected Greater New Haven’s steady office market last year.

The office market overall was consistent for the year, with some sections like the eastern shoreline area and New Haven’s central business district showing good numbers.

“[It has been] fairly flat for the year,” said Rich Guralnick, a senior broker with North Haven-based H. Pearce Real Estate Co.

The city itself had fairly strong leasing for the year, according to John Keogh of Colliers Dow & Condon in New Haven. The company this year changed its criteria for figuring vacancy rates, excluding the city’s biotechnology space from the inventory on which the report was based, and dropping two office buildings that are occupied by single tenants.

As a result, numbers are hard to compare. But based on the old numbers, there has been some improvement in the vacancy rate. Without accounting for the new exclusions, New Haven’s office vacancy rate went from 14.6 percent at the end of 2004 to 12.6 percent at the end of 2005. That means there was positive absorption of 80,000 square feet, Keogh noted.

“I’d say that it’s a strong year,” he said.

It was mostly the expansion of existing tenants that led to the positive absorption in 2005, he said.

“Usually leading the way into that are Yale [University] and the affiliates of Yale-New Haven Hospital,” he said.

There were also a healthy number of lease renewals.

“That’s important in terms of the underpinning of a market,” Keogh said.

If existing tenants are not doing well and staying in the market, the market will be weak, he added.

“If they’re not renewing, you’re going to have a problem,” Keogh said.

The third quarter, in particular, saw many renewals.

“[The third quarter’s] unheralded leasing activity by existing tenants is the key to New Haven’s healthy office market,” Keogh wrote in a third-quarter report. “Few new tenants come to town, and from time to time one leaves or folds. For the owner of a vacant building, it often seems as though there is nothing going on in the market. But the amount of leased space here continues to grow, and that is because the core occupancy group of space in the city – dominated by law firms, social service agencies and Yale – is stable and healthy.”

Some tenants that renewed or expanded their leases in the third quarter were Albertus Magnus College and the VNA of South Central Connecticut at 1 Long Wharf Drive, the New Haven Board of Health at 54 Meadow St. and the law firm of Licari & Walsh at 105 Court St.

Based on Colliers Dow & Condon’s new criteria, the vacancy rate for the end of 2005 was 16.5 percent, with the central business district’s vacancy rate 12 percent and the non-CBD 23.5 percent. H. Pearce, which tracks Class A and B office space, have shown an 11 percent vacancy rate for New Haven’s central business district.

‘Setting Up Shop’

Some interesting trends are shaping the market in Greater New Haven. H. Pearce shows the overall vacancy rate for the 14-town area at 18 percent.

“There continues to be, in the CBD New Haven, property being taken off the market,” Guralnick said.

Developers are seeing the need for more apartments in the city’s downtown, and adaptive reuse of older office buildings is becoming more and more common. That may be falsely strengthening the office numbers, Guralnick said.

The office market is seeing success in towns like Madison on the shoreline. The office market there is tight. A newer, 32,000-square-foot building at 1291 Boston Post Road in Madison is fully occupied, and developers are breaking ground on more office space there.

Another success story is the 30,000-square-foot Stony Creek Medical Center at 6 Business Park Drive in Branford, which was 100 percent leased before its doors first opened last year.

One of the trends fueling the success is that executives who live in the area are favoring offices or satellites near where they live. The traffic they face driving into New Haven can be a headache, so they are opening offices near their homes.

“So they’re setting up shop,” Guralnick said. “It’s an interesting little niche.”

There are four $1 billion companies that have satellite offices in Madison, he said. H. Pearce also has been getting inquiries from other companies interested in offices there.

Medical office space also is leasing quickly in the suburbs, Guralnick said.