ROBERT CASCELLA – A ‘trickle-up effect’
For all the current housing market blues, real estate has found an upbeat tune in commercial properties.
With nearly all the data for the first quarter collected, the state’s number of commercial building sales for 2007 is beating the figure posted for the first quarter of 2006 by 27 percent. The three-month period has seen 268 commercial building sales, versus 211 a year ago, according to statistical data from The Warren Group, parent company of The Commercial Record.
“The financial markets are continuing to stay strong,” said Steven Greenbush, first vice president with CB Richard Ellis in Stamford. “As long as that stays consistent and the unemployment rate stays down, we’ll continue to thrive.”
The biggest increases in the number of sales happened in New Haven County, which jumped from 57 in the first quarter of 2006 to 96 for 2007, and in Fairfield County, which moved from 41 a year ago to 55 in 2007, according to The Warren Group’s data.
The strong performance of the southwestern part of the state seems to surprise no one. Robert Cascella, senior vice president of Coldwell Banker Commercial-Scalzo Group in Danbury, described it as the “trickle-up effect” from New York.
“There has been a migration east and north [from New York] for a very long time,” Cascella said. “It’s just been a slow migration.”
Not only are New York businesses looking to move into Connecticut, so are New York prices.
Lease rates for prime New York office space are currently more than $100 per square foot, Greenbush noted, and now some top-tier locations in Greenwich are attempting to do the same. Greenbush said he recently wrapped up a couple of leases in Greenwich that both topped $90 per square foot.
Within Greenwich’s central business district, the average per-square-foot rate for space available during the first quarter was $91.50, according to Greenbush. Moving east and north across the county, the per-square-foot prices drop steadily, spanning a range from the low $30s to the mid $50s in Stamford and falling off to around $20 along the county’s inland, eastern edge, he added.
‘A Great Run’
A key factor driving the market is availability.
“There’s not a lot of product on the market,” said Nick Morizio, president of Colliers Dow & Condon in Hartford. “Institutional investors are buying up the big properties.”
Timothy McMahon, commercial associate for O,R&L Commercial in Branford, agreed that availability has been limited.
“It’s still a good time to be a seller,” McMahon said. “I think there’s been some upward pressure on lease rates because there’s been a fair amount of absorption.”
McMahon recently brokered the $1 million sale of 330 East Main St. in Branford, which has 12,000 square feet of retail space anchored by Zane’s Cycles.
Cascella’s office recently brokered another retail sale, the $1.2 million purchase of 14,000 square feet at 465 Federal Road in Brookfield. The office also just inked a $500,000 sale of a 2,200-square-foot office condominium in Bethel for Aflac Insurance’s statewide headquarters.
“For the past three to four years, we’ve had a great run on sales of commercial properties,” Cascella said.
That trend has led Cascella to explore new ways of shopping available properties.
For example, there was a 20-acre retail site in Brookfield that Cascella said he decided to market in an unconventional way. Knowing certain investors would be interested in the site, he sent out offers to bid on the property. Within two weeks, there were 12 offers, some of which were at or above the projected high-end asking price, he said.
“We’ve put on six new agents and brokers this year,” Cascella said. “And we put them on because we’ve got the business to put them on.”
The quickened pace of transactions is prompting some current tenants to look into the future and forecast their needs.
“Businesses are signing anticipation leases so they don’t get boxed out in the future,” Greenbush said.
One business recently increased its space by 50 percent – from 10,000 square feet to 15,000 square feet – for that very reason, he said. Even though the extra 5,000 square feet likely won’t be needed for another two to three years, the move was made to keep someone else from taking it, he said.
“These companies have to be proactive in thinking about their real estate right now,” Greenbush said.
It’s another reason commercial brokers are optimistic about the current climate.
“We’re all having some pretty good years,” Cascella said. “And this one appears to be as good or better than last year.”
Looking ahead, Morizio sees more of the same.
“For 2007, I don’t really see any major changes,” he noted. “The economy’s good for us.”
Morizio said he is more concerned about 2008 and what will happen with the interest rates.
“If they go up, that would affect commercial real estate,” he said. “If not, we’ll keep rolling along.”
