What's Happening in Greater New Haven Commercial Real Estate?

As has been stated so many times, this is a year like no other. Real estate, like every other sector of the economy, has been impacted by the pandemic, but it hasn't been all bad. Industrial real estate, and anything that can be used for distribution, has been doing very well in an era of home delivery. Not only did Amazon open a big facility in North Haven, they are also gobbling up property in Orange, for their Last Mile project. Investors who thought ahead have been buying up property that might be used by Amazon, or suppliers to Amazon, and this includes both local and national investors. Investment real estate, in the form of multifamily, has taken somewhat of a rent hit with the closing of colleges and universities, but the occupancy rate in the region is still high. Again, both local and out-of-town buyers have been active in our local market. Volatility in the stock market always helps investment real estate. In addition, people who work in NYC and its environs can easily come up as far as our region now, since most workers don't have to go into an office every day. Speaking of offices, the trend to use less space for office has continued. Now it may be less about open work space, and more about the lack of use of all space over the past nine months. That is making tenants re-evaluate how much square footage they really need. In one recent example, a firm that has been largely remote is rethinking a smaller floor plan, because of file storage. Once you have to make a trip somewhere to look through files, there's no real advantage to paying for Class A space to have them next to your desk at work. For a far lower cost, those files can be stored off site. We expect telecommuting, at least some of the time, to continue, and those who don't need to commute will take more residential space, further boosting the residential and investment sectors. That leaves retail, the weakest of the four. While drive throughs and pick up locations are doing well, restaurants, hotels, and bars are clearly not. While they should eventually come back, some of them won't make it, and some will have less margin for rent. Entertainment is a steady driver in most economic conditions, but this one is an outlier. There are a lot of signs out there, and they won't all go away soon. It means that landlords may have to give more incentives, and perhaps take lower rates, at least until the recovery is well underway. Connecticut, and Greater New Haven, have both been fortunate in being ahead of the national market in real estate, due to lagging past performance. If that continues, we can expect a good year next year. All the new sheltering New Yorkers should boost retail, investment, and even office, and their purchases will fill all that distribution space. For those of us in the real estate industry, there's our silver lining.

Southwestern CT housing prices strain owners and renters (From CT Mirror)

The following article is from the CT Mirror and was written by Schae Beaudoin, please click here to visit CT Mirror online

Almost half of Americans pay too much for their rent, and in southwestern Connecticut those numbers are even higher, says a national study.

Harvard University’s annual State of the Nation’s Housing report says 18 million renters across the nation are burdened by their housing prices. Homeowners and renters are considered “burdened” if they spend more than 30 percent of their income on rent.

In Fairfield and New Haven counties, about 55 percent of renters are considered burdened. Both counties are in the top ten in the nation for percentage of burdened renters. The national average is about 48 percent.

Additionally, over 11 million renters in the U.S. were considered “severely burdened” in 2015 because they paid at least half of their income for housing. The number of homeowners considered severely burdened was at its lowest since 2004, but there still were more than 7.5 million Americans in that category.

In their proportion of burdened homeowners, Fairfield County is behind only the New York City and Los Angeles metro areas. The Hartford metro area, which includes Hartford, Middlesex and Tolland counties; the New Haven metro area; and the Worcester, Mass., metro area, which includes Windham county, also are above the national average for burdened homeowners, which is 24 percent. About one out of every three homeowners in Fairfield and New Haven counties are burdened, according to the report.

Burdened renters and homeowners

Percentage of burdened renters and homeowners in CT, surrounding metro areas and the national average

Area	Percent of burdened renters	Percent of burdened homeowners
Fairfield County metro	55%	35%
New Haven metro	55%	31%
Hartford metro	47%	27%
Worcester metro	46%	27%
New York metro	53%	36%
Boston metro	49%	28%
National average	48%	24%

HARVARD JOINT CENTER FOR HOUSING STUDIES, STATE OF THE NATION’S HOUSING 2017

Rents in Fairfield County are among the highest in the nation, with median rents higher than those in the New York and Boston metro areas.

Pete Gioia, economist at the Connecticut Business and Industry Association, said Fairfield County’s high prices aren’t new, and Connecticut is relatively affordable compared to the larger surrounding cities. In Boston and New York City, housing prices are growing faster than they are in Connecticut. Affordability problems arise when houses in buyers’ desired price range aren’t available.

“Is the housing stock that’s available comparable to what purchasers are looking for? That’s where you get into some affordability issues,” Gioia said. “This is not just true of Connecticut. This is true of other areas. There’s a lot of buyers out there for reasonably priced housing. There’s fewer buyers out there for very high-end, expensive and large properties.”

While median income for renters in New York, Boston and Fairfield County are similar, the median rent in Fairfield County is about $100 higher per month than in Boston and New York, suggesting higher rents, not lower incomes, are behind the burdens on renters in Connecticut.

Fairfield and New Haven counties have some of the lowest percentages of 18- to 24-year-olds heading households. About 10 percent of 18- 24-year-olds are independent heads of households in those counties. The national average is closer to 20 percent.

Gioia said affordability probably keeps some younger millennials from moving out on their own in Connecticut, and many who do leave for other places. Gioia said students who leave the state for college are more likely to stay out of state. Larger metro areas also appeal more to younger people, he said.

“If you’re an unmarried 23-year-old, you want to be where the action is, and there’s a heck of a lot more action in New York City or downtown Boston than there is in Connecticut,” Gioia said, adding many young people come back to Connecticut later in life when they begin families.

However, Gioia said there is economic opportunity here. “If you’ve got the skills, you can make a pretty darn good income in Connecticut, even if you’re fairly young,” Gioia said.

The report found that nationally, higher rents may become a norm. The number of rental units costing less than $800 per month has decreased between 2005 and 2015. In the same decade, units with monthly rents over $2,000 increased by 1.5 million.