New Haven County’s commercial real estate market just got a little frothier. A Connecticut real estate investor affiliated with Stamford’s SWC Office Furniture has purchased a 50,000-square-foot office building in Branford, marking the largest investment sales deal in the county’s outlying towns in months.
Investment sales and leasing activity has increased modestly in New Haven’s suburbs. What does that mean? It means that companies that were on the sidelines during the recession and more recent sequester debates are increasingly pulling the trigger on real estate deals they wouldn’t have dared to make in the climate of uncertainty so pervasive in the industry for the last few years.
In Branford, the 50,000-square-foot, Class A office property at 322 E. Main St. was 38 percent leased prior to selling for $4.5 million. The building, constructed in the early 1990s, sat vacant since 2009, when Curagen Corp., a major biotech firm, was sold to a Massachusetts company. But last fall, the former owner, TKJ Assoc., landed tenant Durata Therapeutics for an 18,000-square-foot lease, one of the biggest deals in the market in recent months.
Then, coinciding with the purchase of the property, the buyer inked two new leases for the entire first floor, bringing the building’s occupancy close to 70 percent. Those kinds of deals were near impossible to come by in the market for the last few years.
Activity In Suburbs ‘Ticking Up’
“Activity has ticked up over last year, modestly,” said Steven Inglese, principal of the New Haven Group, who brokered the Branford transaction. “There are several other deals out there that you wouldn’t have seen last year or the year before. Market conditions continue to get modestly better. Everyone feels a little better. There’s capital, equity out there that’s interested in doing deals.”
However, investors are still being prudent with their money, and are waiting for the best deals they can find, Inglese added. Conversely, sellers don’t need to sell problem properties because interest rates have been so low, so owners can refinance instead of having the keys taken back by the lender.
“In other times, some properties would have gone back to the banks, but since interest rates are so low,” they can weather the storm and refinance, Inglese said.
Interest in Branford has picked up. John Keogh, senior broker for Colliers International in New Haven, has been evaluating available space in Branford with a biotech firm he’s representing.
“The impression I get is things are doing pretty well, that there’s a recovery going on there,” Keogh told The Commercial Record.
Other suburbs in New Haven County have experienced upticks in activity as well. The owner of 38 Wellington Road is looking to unload the property, which is fully occupied by the state Department of Children and Families. DCF’s lease for the 39,907-square-foot building runs through November 2018, according to marketing materials from CB Richard Ellis.
Commercial real estate in the city of New Haven is holding its own as well, according to Colliers’ Keogh. The city’s overall vacancy rate is 14.6 percent, a few percentage points above what most industry experts consider a well-balanced market. Yet Class A space is at 20.8 percent vacant, and Class B space is 10.6 percent empty, according to Colliers. Six years ago, Class A space was just 9.5 percent vacant, and B buildings were 17.9 percent unoccupied. But eh overall vacancy rate back then was 14.7 percent.
That’s all due to several institutional-gauge tenants, like the former SNET, United Illuminating and First Niagara Bank, being gobbled up or moved operations out of the state, Keogh offered.
“There’s been a big [outflow] of Class A tenants from the market over the last 10 years or so, and those are really starting to show up in the stats,” he said.
Email: jcronin@thewarrengroup.com
