No sane person would claim New Haven is the Grand Central Station of office space, home to hordes of tenants just waiting to buy their tickets for the next local headquarters lease.

And the already dim local office market may get even darker in coming months, thrown into sharp relief by brightening residential and lab markets.

Earlier this year, Colliers International reported that the market was flat as a pancake across the 59-building portfolio Colliers tracked through the first quarter.

Total available space in those properties fell 320 square feet, essentially equal to the leasing of a conference room, according to the report.  While tenants played roughly 50,000 square feet worth of musical chairs, absorption was nonexistent, according to Colliers. 

‘Lukewarm Market’

“New Haven’s always been a bit of a lukewarm market,” said Peter Shiue, a senior broker for Colliers in New Haven. “We’ve never had a ton of activity in any given quarter.”

Overall vacancy increased to 15.4 percent from 13.7 percent over the same period last year, according to information from Cushman & Wakefield. Class A vacancy rose three percentage points to 18 percent, while Class B remained almost unchanged – up 0.7 percentage points to 12.3 percent. The entire central business district consists of roughly 2.8 million square feet of total Class A and B office space, according to Cushman. 

But that lackluster vacancy rate does not reflect the 44,000 square feet of space that will hit the market in the coming months. In the next month, the United Illuminating Co.’s lease for 211,000 square feet at Connecticut Financial Center will expire, with the utility relocating to Orange. Yale University and other tenants will re-absorb about 70,000 square feet of the space that is set to hit the market, according to an industry source familiar with the property. 

But that means more than 44,000 square feet of negative absorption will likely occur at the property at 157 Church Street. Add to that an additional roughly 40,000 square feet that is or will become vacant at Connecticut Financial Center and there looks to be about 80,000 square feet of vacant space at the 467,500-square-foot property, said Steven Inglese, principal with New Haven Group, a local commercial brokerage.

Adding salt to the wound, AT&T is trying to sublease 40,000 square feet it intends to vacate at 545 Long Wharf Drive. And there’s no one waiting in the wings to swoop in and scoop it up, according to Inglese.

Glimmers Of Hope

“Clearly the Class A market has softened [in New Haven],” 

Inglese told The Commercial Record. “There’s nobody substantial in the market right now. The market is really slow-moving. Tenant activity is slow across the board.” 

That’s not to say that nothing is happening in commercial real estate industry in New Haven. It just isn’t happening in the office market. 

Alexion Pharmaceuticals recently decided to relocate to New Haven, a decision that served as the impetus for construction of a new lab and research building to be built on College Street near Yale-New Haven Hospital and the Yale School of Medicine. The 426,000-square-foot building, expected to feature street-level retail and a parking garage of at least 600 spaces, will cost about $100 million and would open in June of 2015. Alexion will occupy about three-quarters of the new lab building.

And Yale University is continuing with its building program. Work on the university’s 250,000-square-foot, $150 million School of Management building is progressing well. 

And work on two residential complexes bordered by Canal, Prospect and Sachem streets, with a price tag of $500 million, is expected to begin shortly.