Buyer Brokerage for Office Tenants

 Many firms have a person inside the organization who would be in charge of leasing office space. In many cases, they have a narrow range of buildings that they are considering, and most of those buildings would have leasing agents. It seems simple enough to have that person call the various leasing agents, gather information about the lease terms and availability, and compare the needs of the firm against the possibilities. 

Especially when dealing with professional firms, there can be an attitude that the real estate agent does not have much to add.  This is not usually true.  The leasing agent for the building represents the landlord, and, while s/he can show the space and prepare the lease, that falls short of everything a tenant would want to know.  Knowledge of the local market, terms common to the neighborhood, landlord concessions, and fit-up allowances are all important.  Understanding what to ask for is a key part of the leasing process. Good agents are in touch with current practices, and may be aware of going rates, even before they are published or can be used in an appraisal.  Since appraisers can only use information from closed transactions, there will always be a lag in that regard, unless an agent has another source.

Sometimes the leasing agent may also represent the tenant. If they are in formal relationships with both, that is called dual agency.  It must be disclosed, and agreed to, by all parties.  It is not uncommon, but having a written agreement means that there is a fiduciary duty to both sides.  Although that duty exists, it is still the norm that the landlord would pay the commissions, even for the buyer's agent.  When that is true, the tenants are receiving help and information that is not costing them anything.  

More on that last point:  Could you negotiate a better deal, if you had no agent who had to be paid?  That is a commonly held belief, but it's important to realize that, without agents, both sides expect to save money. Whether or not it happens is subject to negotiation, but it would be naive to think that the tenant would get all the savings.  Even if they did, they might pay more for the space because of scarce knowledge of the going rates, concessions, and fit-up allowances.

In some ways, it can be akin to the advantage of using a good travel agent.  You still pay the advertised rate for your trip, but you get the benefit of added background, and the commission is paid by the vendor or venue.  In fact, you may well do better with the travel agent involved, especially if you need to negotiate terms or changes.  Think of that when you consider a new office lease.  To use a real estate professional or not?  The answer should be clear.

Greater New Haven is Poised for Liftoff (Literally)

For decades, Greater New Haven business leaders have been pointing to the dwindling fortunes of Tweed New Haven Airport as a major barrier to economic development in the region.  This week's announcement that the airport will be privatized for at least the next 43 years, with a longer runway and a new carrier offering flights to several cities, is a huge boon to our area.  

Connecticut has spent most of its air transportation money on Bradley, which is now offers international, as well as domestic, flights, and is the biggest of the State's three airports.  There has been a great deal of rivalry between Sikorsky in Stratford and Tweed in East Haven.  Neither one has made much, if any, progress.  Both have been hampered by surrounding residential developments, short runways, and poor prospects for big carriers.  Nor has either location garnered steady support from its legislative delegation.  

It's a new day now for Tweed. By inking a private deal, public sector funds are no longer necessary.  The powers that be in Hartford don't need to be courted, and they should be nothing but enthusiastic about this outcome.  Both New Haven and East Haven, whose borders it straddles, will see upsides from this arrangement, apart from a boost to the region as a whole.  The terminal will be moved, which will ease the traffic burden on the Morris Cove neighborhood.  Jobs will be created for both municipalities, and other development should spring up on the terminal side.  

Once we can offer residents convenient flights to hubs or favored destinations, within minutes of their homes, people who travel regularly on business, or even for pleasure, will reap major benefits.  Whether they park at the airport, get dropped off, or take a short Uber ride, they will save hours of time now taken up with congestion leading to the NYC airports.  The certainty of the amount of lead time required to get to Tweed, and the small size of the TSA line, will outweigh in many cases the need for stopover plane changes to many cities.  

Regional business leaders have long known the untapped demand for a viable local air transportation option.  With the huge increase in remote work possibilities brought on by the pandemic, many more people are likely to choose to live in Greater New Haven.  We have recreation, schools, health care, and the arts, all in abundance.  Now we will have commutability as well.  Let the commercial expansion begin!

Ecommerce is Still on the Rise

A recent article about retail sales in the New York Times indicated that, while online retail--especially Amazon--had done very well during the pandemic, it still only amounted to about a quarter of retail sales.  That has some interesting implications for commercial real estate in Connecticut.

Given our location between Boston and NYC, and our high average income within the State, it stands to reason that, if ecommerce has not reached its peak yet, our warehouses, flex spaces, and raw land should do well in the future.  Distribution is the key to timely deliveries, and the ability to get something within a couple of days is a key factor in deciding whether or not to buy it online.  Whether goods are traveling further up into New England, or being delivered to homes around us, there will need to be warehousing available near our highways, railroads, and airports.  

Although our roads and bridges have been a challenge for trucks and overland traffic, Governor Lamont's call for a stronger focus on infrastructure, combined with President Biden's emphasis on the same, seem to point to a brighter future for distribution in and through Connecticut.  Smart buyers will begin to develop properties that have been languishing, and take advantage of changes coming down the pike (pun intended!).  Even if there is only a small continued shift toward home delivery, the amounts in question are enormous. Those developments should get filled, and provide income for the owners well into the next economic cycle.  

Set a New Deadline

We are just coming off of what turned out to be a very busy December.  There were lots of changes, of course, with the new Federal tax bill, but it was--and still is--very unclear as to whether some things should have been done last year, or will be more advantageous to do in 2018,  Nowhere is that more true than in the real estate realm.

So, while uncertainty generally slows a process down, last month it sped up.  When I tried to think of why that would be, I realized that the end of a calendar year is a powerful and motivating deadline.  All sorts of people rush to finish projects and clear off their to-do lists before a year ends.  This year, despite all the potential changes, was no different, and even busier.

It made me conscious of the fact that the real estate market has been slowed down by people feeling that there was no pressure to make decisions.  Instead, they thought that properties would continue to be available, maybe even for less, into the foreseeable future.  Our job as agents was to try to create urgency.  That was often hard.

Therefore, our hope for next year is that all potential and current clients have a self-imposed deadline of some sort.  Whether their hope is to move, sell, or redeploy assets, everyone needs a finish line to cross.  Uncertainty can be problematic, but, if it lasts too long, more is lost by waiting than by simply moving on.

Greater New Haven, or Connecticut as a whole, residential, commercial, or investment, buy, sell, or rent--all are choices.  Just make one, and you will feel accomplished and relieved.

Real Estate in Tokyo

It's always fun on a vacation to see what real estate is like in other places.  I recently vacationed in Japan, and got a chance to see various cities there.  The most interesting, from a real estate point of view, was to see how the 36 million people in Greater Tokyo live and work.  They have lots of very tall buildings, obviously, and they have a lot of diversity in their architecture. They even have one building that is designed to look like a beer stein, with a square lower part, and an upper part that juts out and is the color of foam!

 Another interesting point is that almost all of their hotels are at the tops of buildings, so that the lobbies are on upper floors, with offices beneath.  From a commercial real estate point of view, one would assume that the higher room rates for good views would have been outweighed by the higher rents that could be charged in leases to firms in the buildings.

The main takeaway from Tokyo is just how many people there are, yet how clean and orderly it is.  There are no public trashcans visible, and they have the highest number of vending machines in the world, per person (there are even machines on the tops of mountains and in the woods!), but there is no litter.  And the Ginza district looks like Times Square, but with bigger buildings and more upscale.

There is one intersection that has 2000 people cross every time the light changes; even so, it lacks the chaos and physical contact that crossing a NYC street entails.  People line up for everything, and wait politely for their turn. The main subway station covers at least one city block, but looks more like (and functions more like) a mall.  Departments stores have food halls and restaurants, some of which only serve one thing--and they are still crowded.

So now I am home, enjoying the peace and quiet of our little state, but happy to have seen the vastness of another vista.

Big Data

We live in the age of Big Data, and many people make their livings seeking out trends and truisms.  We do a lot of that in real estate, and most clients begin a search for property by trolling the internet for information.  There are many services that compile data (perhaps not surprisingly, many of them are owned by the same parent company).  Some choose to look at the listings themselves.  Others seek out recent sales in a given market, or compare rental rates or vacancies across metropolitan areas. 

Of course, when you Google a property, what comes up may be old, or outdated, or even wrong.  Area averages may not apply in certain cases, for any number of reasons.  That's where agents come in.  At the end of the day, or the transaction, we are still in a people business.  Clients are buying our negotiating expertise and local market knowledge.  Whatever the issue that arises, we've probably seen it before.  If not, we know where to seek the answers.  If you need the help of other professionals, we know them, and can refer you out.  Perhaps the day will come, although I doubt it, when entire transactions will be done on line, with no parties ever laying eyes on each other, but we are certainly not there yet.  So take advantage of what's available on the internet, and then call a Realtor.  We're here to provide the rest of what you need!

The Crystal Ball is Hard to Read

If we all knew what was going to happen in the economy before it happened, we'd all be very wealthy.  As it is, people are wondering what will happen in the Trump Era.  For real estate, it should be a good thing, since he is, after all, a real estate developer himself.  We know that he's planning to cut taxes in certain ways, and he hopes to speed up the construction of infrastructure.  Against that, there is the possibility that he will eliminate or cut down the interest deduction for mortgages, or that his social policies will affect places like New Haven, which is a sanctuary city. On the whole, however, we should see some benefits for those who own and invest in real estate.

The stock market has already weighed in.  After an initial downturn, it went zooming back up, and clearly is behaving as though Trump will be good for business.  If so, real estate should have begun rising.  We can't tell what's under contract, but the lag time for closings in the commercial sector, and the length of time that a transaction takes, means that we haven't seen anything yet.   But we probably will.

Assuming that's true, the race will go to the swift.  Those that buy near the beginning of the rise will profit the most.  So, what are you waiting for?

Positive Implications for Investment in Our City and Region

I couldn’t have said it better myself, so I’ll just reprint it here....

UP CLOSE:
New Haven, a new millennial magnet

by Jiahui Hu at Yale Daily News

Elm City Social opened last July. Since then, the bar’s wood paneling and jazz notes of modern hits have transported patrons to the pre-prohibition era. Bartenders in all black serve up craft cocktails such as The Black Widow, which combines absinthe and Sauvignon Blanc with deep cherry notes, and The Rubber Ducky, which is served to patrons complete with a yellow duck floating atop the ginbased mix.

The opening of the craft cocktail establishment — the sort of bar that might seem more at home on a side street in Manhattan than in a city 60 times smaller than New York — is not an anomaly in the Elm City. At least, not any more.

A decade ago, visitors to downtown New Haven would have encountered parking lots interspersed with boarded-up shop windows and the odd retail store or two, said Chuck Mascola, who has lived in the city since the 1980s and now runs an advertising firm. Now, in 2016, parking is impossible to find and commerce thrives on every block, Mascola said.

“It was sleepy,” Mascola said. “There were nice things, but crummy things mixed into it. Now it is hard to find eyesores or to see anything that disturbs a great urban landscape.”

“You find a city that is seamless,” he added. New Haven has quickly transformed from its 1990s reputation as a crime-ridden wasteland to a burgeoning commercial zone that is quickly attracting a flurry of new residents.

But what has been the driving force behind the city’s change of pace?

People — young people. And lots of them.

As the Millennial Generation — born of the baby boomers, between 1980 and 2000 — transition to adulthood, New Haven has seen its under-35 population increase by 45 percent. Millennials have been graduating from college and moving to cities since the turn of the century. With the net increase in young educated professionals with money to spend on luxury lofts, cocktails and restaurant options, New Haven entrepreneurs, developers and government officials have seized the opportunity for lasting economic growth beyond Yale’s gates.

WHO ARE THE MILLENNIALS?

Atlanta-native Melody Oliphant is no stranger to changes of scenery. After attending boarding school in Tennessee and college at Wesleyan, Oliphant needed to find a medical job in New Haven if she wanted to live and work alongside her girlfriend of one year, who returned from a fellowship in Rio de Janeiro with a job offer in the Elm City. Oliphant, who previously worked as a genetics researcher at New York’s Icahn School of Medicine, secured a two-year fellowship at the Yale Child Study Center. She and her girlfriend are two of the several hundred net recent college graduates that move to New Haven each year.

Taking into account the number of college graduates who leave New Haven, Elm City has seen a yearly net increase of 300 to 400 of this demographic between 2000 and 2012, said Mark Abraham, president of Data Haven — a New Haven-based data analysis nonprofit.

This demographic change is a microcosm of a larger national trend. Although college grads typically move to cities, there is a much larger cohort of 25–35-year-olds in the U.S. — who make up the majority of millennials — than there have been ever before.

The Elm City’s 45 percent boon in recent college graduates matches that of common “yuppie magnets,” such as Nashville, Tennessee; Denver, Colorado; and Austin, Texas. New Haven’s increase also exceeds that of Northeast metro areas Boston, Massachusetts and Providence, Rhode Island, where the percentage growth during the given time period was 12 and 6 percent, respectively.

In fact, Abraham said, adjusting for overall population growth, New Haven may be attracting and retaining a higher proportion of college-educated adults than Austin, Texas or Houston, Texas which are traditionally known as hubs for this cohort.

Matthew Nemerson SOM ’81, city economic development administrator, provided historical perspective on the recent trend. When baby boomers, who are the parents of the millennials, graduated from college in the mid-1980s, a large influx of young educated professionals moved to New Haven, similar to what is happening today, Nemerson said. But less than a decade later, these professionals departed for the suburbs to raise their families, he added.

Mascola and the young professionals interviewed all recounted childhood memories of living in the suburbs. But many say they are questioning the idealized model of a suburban family lifestyle, given their experience living in or near downtown New Haven.

“I wanted to move some place closer to work,” said Jenny D’Amico, who works for Yale Health Plan and moved from a Connecticut suburb to an apartment between downtown and Hamden.

D’Amico added, “The idea of being able to walk to work was really cool. It’s also a really good city for young people, especially down Chapel Street, by the [New Haven] Green and by the hospital.”

Although Oliphant and D’Amico happen to be Yale employees, many more of the city’s new influx of educated young professionals work for small tech companies and biopharma firms.

WHERE DO THEY WORK?

Last summer, Arvinas CFO Sean Cassidy considered taking his company — one of the most successful biotechs based in New Haven — out of the city. A lack of lab space almost convinced him that the company’s future was elsewhere in the Northeast.

But City Hall administrators caught wind of the rumor that Cassidy would leave New Haven and take his $300-million-deal-scoring biopharm with him.

Nemerson said the city estimated that each Arvinas employee that left the city would take 150 other jobs with them. Though Arvinas has only 30 employees, Enrico Moretti, an economics professor at the University of California, Berkeley, argues that each high-tech job creates five new jobs in the city it is based in.

Moretti’s research indicates that job markets are larger in cities with high-tech industries because employees tend to spend large proportions of their salaries on local businesses, such as housekeeping, therapy and restaurants.

In response to these predictions, the city hastened to assist Arvinas’ purchase of more lab space. By mid-October, the company had signed a deal on a 5,000 square foot lot in Science Park.

For Nemerson, the proactivity exhibited by the city to keep Arvinas must continue for the city’s job market to grow.

“The main thing right now that will determine whether we hold onto this population will be the continued introduction and evolution of modern knowledge-based jobs,” Nemerson said. “Companies like Alexion, Achillion and Arvinas become our future.”

The Elm City’s advantages lie in its low rents and wealth of available space for expansion, Nemerson said. Biotech companies looking to expand can easily purchase new space, which is not the case in the crowded real estate market of Cambridge.

In January of this year, the city regained one of its greatest success stories. Alexion Pharmaceuticals — a $2.64 billion biopharmaceutical founded in Science Park that employs roughly 1,200 people — moved into its new headquarters to 100 College St. after leaving the Elm City in 2000 due to difficulties securing enough lab space to serve its needs.

At the company’s ribbon-cutting ceremony in February, Mayor Toni Harp expressed excitement for what Alexion could do for New Haven’s economic development.

“Our economic base is growing stronger as our innovative businesses collaborate with global ones,” Harp said. “New Haven is a model of progressive urban development of national significance.”

Nemerson added that tech companies such as Prometheus Research and Square 9: Softworks also provide significant employment opportunities.

As Arvinas and Alexion employees settle into their new home in the Elm City, they — together with other members of the Millennial Generation — must think carefully about how to make New Haven their home. But where do they tend to pin down their roots?

WHERE DO THEY LIVE?

Yale postdoctoral associate Chloe Taft GRD ’14 teaches a seminar titled the History of Housing in America. She and her class took a March tour of the high-end apartment building, The Novella, which opened last year and offers studios from $1,400 and two-bedroom apartments for $3,200 at the very cheapest.

During the tour, property developers explicitly told her class they were targeting Yale graduate students and young professionals like those at Alexion.

“Downtown New Haven has become a hot site for developers seeking to cash in on a young professional demographic,” Taft told the News. “The majority of these new projects bill themselves as ‘luxury apartments’ and do not include affordable units, although Winchester Lofts does include some.”

Roger Lopez ’18, a student in the class, recounted The Novella’s extensive amenities: a gym, private movie theaters, a rooftop terrace and more. Lopez said residents pay roughly two times the average market price in New Haven for an apartment in The Novella for a sense of community — something that 30-year-olds look for when they relocate.

As Taft’s students toured the building, The Novella’s property manager added that residents were also paying to insulate themselves from the rest of New Haven, which is still perceived as unsafe.

“The tour guide said that you’re paying to not have to walk past the Green and go into the ghettos of New Haven,” Lopez said. “It’s a community in a one-block radius. Rudy’s is across the street. Miya’s is down the block and Yale is right next door.”

With vacancy rates among the lowest in the country, New Haven is also attracting developers hoping to cash in on the high demand for housing. Given the development projects currently underway, by 2017, there will be approximately 2,000 more new apartment units than at the end of 2015. Almost all will be luxury apartments like The Novella.

Other recent developments include the Winchester Lofts, which opened in Science Park in 2013. College & Crown: A Centerpiece went live for rent last year. 360 State St., which opened in 2010, was one of the earliest and also the quickest to be leased-out, Pearce Real Estate President Barbara Pearce said.

“Because of students, New Haven has one of the lowest vacancy rates in the country,” Pearce said. “Now there is a race to keep on [building]. State Street rented so quickly. Eventually like everywhere else, we will stop building once the vacancy rate goes up.”

From the rooftop terrace of The Novella, residents can spot dozens of new bars and restaurants to visit — another consequence of the Millennial Generation’s migration into the Elm City.

WHAT ARE THEY DRINKING AND EATING?

Craig Sklar grew up in New Haven before he entered the beer industry in New York City. For seven years he brewed and bottled the malted drink for Whole Foods Market and then S.K.I. Beer.

Last year, Sklar decided to open a craft beer bar of his own. He chose the Elm City because rent prices in New York City were too high, he said. This summer, his bar The Beer Collective will open on 130 Court St., which is located just three blocks from Old Campus.

Like Sklar, many entrepreneurs and restaurateurs are choosing to take a chance on New Haven due to how cheap it is to rent out a brick-and-mortar site, said Chris Nicotra, who has been an investor in New Haven real estate for the past decade and a half.

According to Nicotra, rent in the Elm City is still well-below that of Manhattan despite having risen steadily to $100 per square foot for commercial space downtown. In the past month, Nicotra has met with several investors from Boston and Providence who have taken note of New Haven’s recent growth and low rent.

“[Entrepreneurs, restaurateurs and developers] see this young demographic of the city and see how they can capture their needs,” Nicotra said. “With The Beer Collective, you’re taking this really hot beer concept and really hot New Haven. The combination is a home run.”

Other home runs — popular bars and restaurants that cater to the young — include Ordinary, Kelly’s, Cask Republic, Barcelona and BAR. In the upcoming months, the owners of Mecha Noodle Bar will open an unannounced concept restaurant that they hope will be novel, like the restaurant-arcade combination Barcade that will open in New Haven this summer.

In the past decade, this pop-up of unique restaurants has made New Haven a foodie destination, Pearce said. Although famous, places like Louis’ Lunch did not transform New Haven into a food capital of the Northeast, she said. But in recent years, restaurants are full in downtown New Haven every night of the week.

“There’s been an explosion beyond what it was before,” Pearce said. “Before it was just pizza and Italian. Young professionals now will spend a greater percentage of their income on food than people did before.”

As investors succeed in the Elm City, opening restaurants and leisure venues such as Karaoke Heroes, their young professional patrons have built a community around their products.

“In the past, I would have said that I would have moved into the suburbs and bought a house,” Josh Levinson, a 35-year-old software engineer, said. “But the more that I am here, I love it and love being a part of the community.”

Bars and restaurants such as Olea, Zinc and Elm City Social receive paragraphs-long reviews on Yelp by the site’s active contributors. Levinson, who is among those that rave about New Haven’s food scene, also operates a blog “Between Two Rocks” where he publicizes his reviews of bars, restaurants and the best pizza in New Haven.

With these new high-rise apartment buildings, five-star restaurants and swanky bars, New Haven is well on the way to transforming its past reputation.

WHAT IS THE CITY’S NEW REPUTATION?

Mascola, born in 1958, did not leave his native New Haven until he turned 18 and moved to Ohio for college. Upon graduating from Dayton University, Mascola worked on Madison Avenue before returning to the Elm City to found the Mascola Group advertising agency. His firm serves companies far and wide, including many based overseas. But one of his most loyal customers is right across from the Green: City Hall.

For the past four years, Mascola has been helping the New Haven Parking Authority promote the new meter system downtown, which he described as the “welcome mats” to New Haven. He added that well-advertised parking meters should convince visitors that downtown is a place to not only play, but also live and work.

He said his dream project would be to create a marketing plan for the city of New Haven. The city should tout its vibrant arts culture, rental prices, economic growth and other attractions for both the young and elderly across the region.

“New Haven has the product and delivers on the experience for younger people and older people,” Mascola said. “What we’re not really doing is packaging and selling that, even though it’s happening without us putting it into a marketing component and giving it a great position line.”

But what is New Haven’s product?

Fun, cosmopolitan and cultured living for a fraction of the cost of New York City living expenses, Nemerson said.

At the forefront of this new reputation is the city’s recent acclaim as a food destination. Levinson added that the city’s recent expansion of bike lanes and sophisticated new apartment buildings have contributed to the city’s new visage as a destination for young adults looking for a modern lifestyle.

Over the past 10 years, the atmosphere downtown on a Friday night has also changed to mirror the sophistication of Manhattan, manager partner of Elm City Social Ryan Howard said.

“The scene in New Haven is really transcending toward a more refined craft era,” Howard said. “It’s in a less clubby stage with more of your craft cocktail and beer elegance, if you will.”

To Nemerson, New Haven’s reputation is a key factor in the city’s retention of jobs. One of the most important considerations for biotech companies deciding on whether to stay in the city for the long haul is the quality of life that the city would provide for their employees, Nemerson said.

To prevent the city’s leading high-tech companies from leaving, Nemerson said he needed to not only facilitate the growth of a high-tech hub in the city, but also show the company’s employees that they would lead an exciting life in the Elm City. The city demonstrates it is an appealing place to live as well as work, he said, with arts, culture and rental prices that are almost 60 percent lower than those in Cambridge or New York City.

“If you have enough people who say that this is a cool place to hang out and spend time, then the software and biotech jobs will come and say we want to hire you and we want you to stay here and have you be happy,’” Nemerson said.

In addition to the growth of high-tech jobs, city officials also hope to persuade New York commuters to live in the Elm City, where rent is lower and the quality of life is comparable to cities such as Stamford, White Plains and New Rochelle.

Taft reaffirmed that all the private housing and business developments — many of which have been publicly supported by the city — fit into city officials’ plans to “rebrand” New Haven and attract a creative class of young professionals including graduate students, researchers, entrepreneurs and artists.

When asked how he would market the city, New Haven native Mascola responded in glowing terms.

New Haven, Mascola said, deserves a brand that is much more illustrious than the city’s current reputation. The combination of creativity outside of Yale’s walls as well as the presence of the University would create a convincing message that the Elm City is, indeed, an attractive place to live.

“New Haven is a brilliant city,” Mascola said. “It is America’s brilliant city. It shines.”

While downtown New Haven glitters on, the sparkle is less brilliant for New Haven’s poorer population, many of whom can no longer afford to live, eat and play in the downtown area.

WHO ARE MILLENNIALS REPLACING?

Last October, West Haven native Kiana Marie Hernandez ’18 sat down with the News.

She and her mother had just spent a year searching the Elm City for an apartment to call home. As they traveled from apartment to apartment, debates about prices —not amenities or decorating styles —lengthened their search.

Hernandez and her mother are not alone.

With the scheduled demolition of Church Street South — a 300-unit affordable housing complex condemned by the city last fall — at least several hundred families in New Haven must enter a housing market that is both tight and high-priced.

Edward Mattison LAW ’68, a member of the mayor’s City Plan Committee, recounted a visit to a homeless shelter for families. Every single family in the shelter possessed federal housing vouchers to subsidize rent. But none of them had been able to find vacant units of affordable housing to spend their vouchers on.

Mattison and Hernandez are not the only ones who have spoken out about New Haven’s alarming shortage of housing for low-income families. Since the federal Department of Housing and Urban development began to relocate families last fall from the complex, it has discovered that it is particularly difficult to keep these families in New Haven because of the city’s dearth of affordable housing units.

Taft, who completed her doctoral thesis on urban planning, said the question that remains is how New Haven residents who face high poverty levels and a severe shortage of affordable housing units will benefit from the city’s economic growth.

“Can some of the investment going to downtown go to address inequalities in other parts of New Haven?” Taft said. “And is the city getting a good return on investment with the incentives it offers developers downtown, or are those profits mostly going to the developers?”

The mayor, Nemerson said, hopes to ensure that downtown New Haven is an integrated community in terms of income and race. According to Nemerson, the city’s new housing developments benefit all demographics of the city’s population by adding supply to the housing market to lower prices. Former Downtown Alder Abigail Roth ’90 LAW ’94 added that the new housing developments will provide revenue to the city to subsidize affordable housing.

But the plight of the city’s poor can be difficult to remember amidst the luxury amenities of The Novella and the hip, dim lighting in New Haven’s newest bars.

Oliphant said she has noticed that New Haven is highly segregated with strict geographical boundaries of race and class. She added that issues of segregation, though not unique to New Haven, are particularly noticeable because of the city’s small size and wealth contrasts in East Rock, Wooster Square and downtown.

“[In New Haven], I often find myself disheartened by the way people, especially so-called progressive people, talk about low- and middle-income neighborhoods that are populated predominantly by people of color,” Oliphant said. “And while the problems in New Haven may not be entirely unique, I do think there’s tremendous potential in locally powered solutions that could prove unique to the communities they’re intended to serve.”

If Nemerson and Roth are correct and the city’s new gentrification will benefit all, how long will that process last?

ON TO BETTER THINGS?

D’Amico said she will not stay in the Elm City forever.

Many young professionals choose to begin a family in residential neighborhoods such as East Rock and Wooster Square that are still reasonably close to downtown, D’Amico said. But New Haven’s reputation as a city with a high crime rate lingers on in D’Amico’s mind. She said the noise of sirens, gunshots and ambulance trucks prevent her from beginning a family anywhere in the city.

“There’s a lot of stuff that I wouldn’t want my kids to be exposed to at a very young age,” D’Amico said. “There’s a lot of poverty. While this is important for everybody to realize, it’s hard to deal with that kind of thing as a child.”

D’Amico’s reluctance to remaining in the city is exactly what Nemerson and other economic development officials in the city dread. They hope that the young professionals currently flooding into New Haven will either move from downtown to streets in the city with stand-alone houses and grassy front lawns. By remaining in New Haven, this demographic will continue to attract businesses, developers and more like-minded professionals to the Elm City.

In a good omen for city officials, key indicators suggest New Haven’s cohort of millennials will not abandon the city, at least, not any time soon.

Unlike their parents, the Millennial Generation is choosing to begin families later in their lives. Young educated professionals in New Haven will continue pursuing the single-life — with high-rise apartments and regular revelry at Elm City Social — for longer than their parents did. Levinson confirmed that he and many of his friends are enjoying their historically lengthy youth.

“[A lot of people I know in New Haven] don’t have kids or want to buy a house — the path that a traditional lifestyle would lead them to,” Levinson said. “A lot of people are delaying buying a house and having a family. They’re pushing it out further and they are enjoying being young.”

The recent influx of the forever young millennials has also been accompanied by their parents’ move into the city.

Hundreds of empty nesters in nearby suburbs have sold their homes to buy apartments downtown, a trend completely new to the Elm City, Pearce said, adding that apartments on 360 State St. or 100 York St. are particularly popular options.

Pearce added that only in New York City have retired adults moved back downtown after raising children in the suburbs. They did so to avoid having to drive, Pearce said.

She conjectured that in New Haven, the recent boom in construction and desire to be close to children has convinced the elderly to trade their grassy lawns for a downtown loft.

“My father moved from his big house in [Greater] New Haven to Whitney Grove Square,” Pearce said. “That was unusual. Now it is very common for people to do stuff like that. If you just took one building at 100 York you would find it astonishing how many people who live elsewhere in Greater New Haven now live there.”

This and the Millennial Generation’s decision to begin families later in life will combine to make the current demographic wave longer and larger, Nemerson said.

Mascola said that signs from his market research suggest many millennials will remain in the city, whether they decide to move into residential neighborhoods or defy their suburban upbringing by raising children downtown.

Mascola learned from his firm’s marketing campaign for the Union, an apartment building on 205 Church St., that the majority of people moving into the building were young adults with children. They wanted to raise their children in the vibrant arts culture that can only be found downtown, Mascola said.

“The new generation came up and wanted to do a different thing,” Mascola said. “They don’t want to go to a mall in a suburban town. They want to go downtown.”

Supply and Demand

Nationally, the residential real estate market is out of whack in the supply and demand, with many fewer listings than buyers, and that's the main thing holding down sales in some markets.  That is usually not the issue in commercial real estate, since there are so many different types of properties, and they aren't often fungible.  There is a problem, however, in that we see many buyers and tenants who cannot find the kind of properties that they are seeking; that is a different variant of supply and demand.


We seem to see more of that issue now.  Why would that be?  First of all, it's much easier for buyers to see what's on the market by searching on-line themselves.  So, when they get to us, they have seen what's there, and they are looking for what's not there.  Secondly, it seems as though there are more Section 1031 tax-free exchanges, where buyers may be more constrained in what they need to buy, and in more of a hurry.  Thirdly, the lingering effects of a bad market have caused many sellers not to list.


What are the lessons here for buyers and tenants, sellers and owners?  If you are a buyer/tenant, it's more important than ever to make sure that you have a real estate agent who knows the local market, since you may be looking for that proverbial needle in a haystack.  We are doing more and more searches for what isn't available, and you can find those things, but you have to know where to look.  For sellers/lessors, the lesson is simpler:  List now.

We're All Busy!

We are smack dab in the middle of our slow season, but it isn't slow!  Although there have been some epic lows in the temperature department, and some messy storms, it isn't shaping up to be the winter that the last ones were. People are looking at real estate, and they are looking both on line and in person.

Weather may be part of it, but I also have thought for some time that we just aren't as seasonally tied as we used to be.  Maybe it's because Connecticut is old on average, and doesn't care as much about the school calendar.  Maybe it's because taxes drive real estate purchases as much as anything does, and that means end of year for lots of people.  Maybe there just isn't any reason at all. Whatever the answer, we can't tell what kind of winter we'll have until we're in the thick of it. 

It's also true that it may not matter that much, because we say that the market is "late" or "early", if the listings and sales don't mostly come in the spring.  That's really just another way of saying that the market for real estate is not as predictable as it used to be.  What that means for us now?  We have buyers and tenants out there, so sellers should decide that spring has sprung, no matter the temperature, and list as soon as possible!

Need New Listings for New Leads

It's slightly unusual to be saying this in January, but we are getting more leads than we have listings to satisfy.  It's a nice problem to have!  For whatever reason, we went roaring into the end of the year, and it hasn't stopped, despite ice and snow. 

Listings tend to expire at the end of the calendar year, so there are typically fewer listings on the market in January every year.  Many owners wait until spring to put their properties on the market.  This year, you shouldn't wait.  We can't predict the weather, but we do know that the calls are coming in, often on the signs we have on currently listed buildings, so waiting wouldn't be the right strategy this year.  Give those buyers and tenants something new to look at--you'll be happy that you did!

What a December!

Our December results gave us real hope for the coming year in commercial real estate in Connecticut.  The first six months of the year, probably in no small part due to the epic winter that we had, were slow, and well behind other years.  As the summer went on, we began to catch up.  In November and December, the closings just kept coming!  It wasn't quite like the end of 1986, where the new tax act coming in 1987 caused all kinds of transactions to close in the waning days of the year before, but there was a sense of renewed activity, and a feeling that investing in real estate in Connecticut was once again a good idea.  We saw some of the same results in residential, especially in the multifamily market, and we certainly hope to see more and more sales and leases in 2016!

Happy New Year!

I've blogged in our residential blog about reasons that we are optimistic for 2016.  There are a few commercial additions to that list. First of all, we had a great 2015 in Commercial. Properties that, in some cases, had been waiting to close for years finally did.  Investors are still definitely in the market, and some of them are coming from elsewhere, since our prices here are so low. Also, the glut of rental units coming onto the market causes demand in the commercial and retail sectors.

These trends are likely to continue next year. In addition, success begets success. As word spreads about prospering investors, others will follow. And the State's late, but seemingly heartfelt, belief that they need to start being nice to the businesses that call Connecticut home should really start to pay off in the intermediate future. Who knows?  We could become the new South Carolina, or Tennessee.  It should be our turn by now!

Market Volatility

When the stock market is at its most volatile, people become concerned--sometimes obsessed--with the value of their portfolios.  Some check the numbers every day, and talk about changing allocations.  Yet shouldn't those same people look at the value of their real estate holdings?  While they don't jump up and down in price in the same way, sometimes we don't check the values until we are thinking about selling.  Assessing real estate value should be a part of any portfolio analysis.


When financial instruments change in value, the percentage of your holdings in real estate can change at the same time, either up or down.  Many people think about buying more real estate when they feel less confident in the markets for other types of investments, but sometimes just the passage of time will move the needle on those percentages.  Could it be time for you to call your agent, and see what your properties are worth today?

The Puzzle of Tenant Representation

Some people may wonder why they need a real estate agent to represent them, if there is a sign in front of the building, and space for rent?  One big reason is to help with negotiating the lease.  Leases vary tremendously from property to property, owner to owner, and landlord to landlord.  They can be very confusing.  Sometimes it is even difficult to tell what the actual rental amount is.  Net leases can be called gross leases with "extra rent", expenses for the common areas can be handled very differently from space to space, and expansions, renewals, rights of first refusal, and other options can seem baffling to people who have not done this before, or not done it often.  We even had one client whose lawyer would say "They can agree to this clause now, or I'll hide it somewhere in the lease and get it anyway".  That's what your agent is for--to guide you through all the twists and turns, and give you guidance as to custom and prevailing rates in your area.  As a reminder for those who may not know, the commission for the buyer's agent is most often paid by the landlord under the terms of the lease: although that can certainly vary, it is common for the tenant not to pay for his/her representative.  As a further reminder, the commission is determined by the lease, which is between the landlord and the listing broker; the tenant has nothing to say about it.  That's why it is sometimes surprising to hear that tenants (and buyers) believe that they will pay less if they don't use their own broker. Usually, it just means more for the listing broker, who is then handling both sides of the transaction.  There are many peculiar things about our industry, and they aren't all in our favor.  Most times it really pays to have a tenant representative, or a designated agent within the brokerage firm, advising you, as a tenant, on terms and conditions, as well as on rental rates.

Investment properties around the country

People have always felt, as Tip O'Neill famously said, that "all politics are local".  Many say the same about real estate, as a variant on the "location, location, location" theme.  It turns out, though, that investment real estate is becoming national, or even global.  Sellers looking to do 1031 tax-deferred exchanges are looking far and wide for the best matches, and there are many opportunities all over for such transactions.  Every day, I receive bulletins for investment properties from everywhere imaginable, with cap rates and returns spelled out.


We find that, as people move to other locations, they often want to move their investments as well.  For example, a shopping center in Milford may be exchanged for an office building in Florida, as the second home becomes the primary residence.  This blog post is just a friendly reminder that we can find you property anywhere in the world, through our connections and networks, so feel free to call us if you have a hankering for medical space in Topeka, an Arby's in San Antonio, or an apartment building in Spokane.  You may not even know that you want any of these properties, but it's an increasing part of our global outlook these days.

Commercial Buyer Brokerage in Connecticut

At a meeting last week, I once again had a commercial agent from another company confidently tell me that buyer brokerage does not apply to commercial real estate.  Although there are real differences between residential and commercial, that law is not one of them.  It may be more difficult to get a regional manager without significant authority to sign a buyer broker agreement, but the law still requires the discussion, even though we might have to settle for having an unrepresented buyer form, or a BBA that only covers one specific property. 


Commercial real estate sometimes gets overshadowed by the sheer volume of residential transactions, and there definitely should be differences in laws and regulations, but it's still a work in progress.  For now, don't be surprised if your commercial agent asks for a signature before showing property, in much the same way that your doctor has you sign a HIPAA form before seeing you (even if you can't remember signing, or don't bother to read the form).  And please, don't shoot the messenger!  Call your state senator or representative instead!

Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period.  If you look at the number for Wallingford you can say “If market conditions do not change and if no new listings come on the market it will take 4.7 months for the current inventory to sell at the current pace of the market.  A balanced market’s absorption rate is typically between 5 – 7 months.”

Connecticut Shifting into High Gear?

A new report from the Connecticut Center for Economic Analysis is predicting an 8.1% increase in CT's economy this year.  That is so high that experts are backing away from endorsing the exact number, but even a growth rate of quite a bit lower would outstrip the national rate of about 3%.  It's about time!  We've been lagging behind the rest of the country--event the December housing figures show us with a decline in 2014 home sales vs. the year before, against the grain of almost every other state--and we were (almost) bound to catch up sometime.

The only big fly in the ointment is the State government's position on business issues.  That encompasses our tendency to borrow against the future, and to underfund pension obligations, both of which make our economy more precarious.  However, the Governor's latest budget proposal shows encouraging signs of trying to correct these problems, and we in the private sector are certainly rooting for both the executive and legislative branches concentrating on improving our rankings as a place to do business. 

Leaving that potential worry aside, it does seem that early indications show pent-up demand on the residential side, frequently a precursor to commercial growth.  Also, we know that there is pent-up demand on the commercial side--it's just being held in check by caution and uncertainty.  This latest prediction should give a big boost to those who've been waiting on the sidelines to act.  This is your year!

Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period.  If you look at the number for New Haven you can say “If market conditions do not change and if no new listings come on the market it will take 9.3 months for the current inventory to sell at the current pace of the market.  A balanced market’s absorption rate is typically between 5 – 7 months.”