Monday, December 2, 2013

Incubator Space

New Haven, with its entertainment, restaurants, college scene, and new rental properties, has become a haven for start-up companies.  Often such companies look for cheap space (compare us to NYC!), cheap labor (all those recent college graduates!), an educated workforce, a fun place to live, and access to universities and their research facilities.  New Haven scores highly on all those variables.

It makes sense that entrepreneurship would be booming now, because it's hard to get a job working for someone else, especially in Connecticut, which is last in the country for jobs recovered from the recent recession (now at 48%).  More often than you might think, a poor job market leads people to start their own businesses.  Those businesses are almost always short of cash, and therefore can't pay premium rents.  Of course, they also fail more often than established enterprises.

On the other hand, they can grow rapidly, and end up expanding into additional space.  They may also migrate from one property to another, belonging to the same developer or investor.  Also, they usually don't require the kind of fit-up that bigger companies do, and may even find unfinished space funkier.  Layouts in start-ups can be freer, with open work areas without private offices common.  So, even if a landlord is taking one kind of risk, he or she could be saving in another expense category.

Think of it the way you might think of buying penny stocks.  You might lose a little money, but the upside potential is almost unlimited!

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