Doubling Down

There have been three pieces of good news for Connecticut real estate this week.  The first was that Hartford Health Care is planning to take a big chunk of 100 Pearl Street, marking a departure from the normal downsizing of office and space users in Hartford.  The second was that the Knights of Columbus have bought one of the two towers on Long Wharf Drive in New Haven.  They acquired it an auction, for $12.8 million, about a third of what it last sold for, but it means that a large employer and player in New Haven is expanding, not leaving.  The last bit of news is not commercial per se, but represents the same theme.  Housing purchases over a million dollars were up 40% last year in Connecticut.  After lots of bad news about values and units, that was a sign that buyers are using their resources to invest in local property.

Having current owners double down on real estate holdings in the state may not be as sexy as bringing in new companies and residents, but it does mean that we may be at the start of a new era, where we retain our jobs, and perhaps then recruit others.  So we view it as a positive start to a new decade!

Tax Effects Uncertain

Pundits spent a lot of time last year, trying to predict what buyers would do in light of the many tax law changes.  People in Connecticut were especially nervous, given our status as a state where changes in the treatment of SALT (state and local taxes) would have a big effect.  Here we are, a whole tax year later, and it's hard to say for sure what happened.  In my own case, many different laws were applied or eliminated, and my total taxes in the end were so close to what we paid last year that I questioned whether we could have signed last year's return again.

On the residential side, where we really thought capping SALT deductions would cause high-end prices to fall, the opposite seems to be happening.  Properties along the coastline especially are flying off the market as quickly as they come on.  Perhaps it's supply, which has declined, perhaps it's the increasing number of years since the last big hurricane, or perhaps people are generally doing well, despite what they may tell pollsters who call them.

Anyway, if you've been thinking that there are no buyers for your properties, think again.  They are out there, and they are buying.

Another Buyer Broker Story

The right of a consumer to be represented themselves by a real estate agent has been the law in Connecticut for at least a decade now, but it is still not understood by many people.  In the commercial arena, where many buyers are more sophisticated, and are used to buying and selling real estate under earlier regulations, it has been slow to take full effect. The way that the law is currently written, it requires a real estate agent to have a written representation agreement with a buyer, before s/he shows that person any listings other than his/her own company's listings, where the listing agreement with the seller would give the agent representation of at least one of the parties. A dual agency agreement must also be signed by all parties, when the agent represents both the buyer and the seller.

Why am I explaining this again?  Because so many people do not understand the law.  I got a call a couple of weeks ago from an attorney, skilled in real estate, and also licensed as a real estate agent.  He told me that he had recently bought a property, which he had previously called me about (to ask questions about the area, not to represent him on a specific property).  He said that he realized only after the deal was done that the listing broker had gotten paid to represent him, because he didn't have a buyer broker agreement.  He had thought, as many people do, that he would save money if he was not represented.  The way it works, though, is that the agent is (almost always) paid by the seller, as a result of a listing agreement, and that fee is named in that agreement, regardless of whether another agent is involved.  That means that, if there are two agents, the agreement between the two agencies (almost always) divides that commission.  If there is no selling agency, the listing agreement would still be in effect, so the listing agency would get that commission.  While that listing firm would owe certain duties to anyone, and would do the necessary work to put the transaction together, the fee wouldn't change just because the buyer chose to be unrepresented.  Brokers who do not represent a person, though, cannot give advice on value, except to state the listing price.  So that question--what's it worth?--can only be answered legally by an agent who represents you.

So why don't buyers want to sign buyer broker agreements?  Sometimes, they want the right to buy something without the agent, or with another agent.  Sometimes that's fair, although sometimes it isn't, depending upon the amount of ground work that has already been, or is being, done.  Sometimes they aren't authorized to sign, which is a problem that the CT Legislature plans to take up this year--it can be fixed by having a commercial buyer broker agreement signed later in the process.  In some cases, they are dealing with more than one agent in different areas, a problem that can be fixed with the proper documentation.  Many times, though, it's just a knee-jerk reaction against signing anything.  But when's the last time you saw a doctor?  If you declined to sign the HIPAA form, I bet that you didn't get in.  (And, actually, I'd put my money on a bet that you signed it, and never even read it.)  Why should real estate not have paperwork also?  It's good business, and good practice. And, it's the law.

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!

New Haven is a Great Place to Retire

I was scrolling, or trolling, on Facebook today, and I noticed a post about New Haven being third on a list of places that are attracting retirees.  New Orleans was first, but we don't have its weather!  However, when you factor in healthcare, culture, free events, and walkability, New Haven stacks up very well.  We have been selling houses in the suburbs to couples who downsize into apartments downtown.  We have also relocated people from out of the area, many with connections to Yale, who come here for their golden years.

What does this mean for commercial real estate?  Providing services in the center city has become more important than ever, not only for retirees who want to be (mostly) car-free, but for busy millennials, as well as for professionals who may live here during the week, or people who just work in the city.  Food places that deliver seem to be more and more popular, as well as places that offer dining options like takeout and/or prepared foods.  There also seems to be no end to the number of restaurants that are prospering in every corner of downtown, and in every ethnic possibility. 

We already knew that many entrepreneurs want to open businesses in the hub of the region, but we expect that trend both to continue and to accelerate.  We know that convenience is important, and that people will pay for it.  We know that time is at a premium, and that walking or biking have become top of mind reasons to live and work in certain communities.  If you have space that could work for someone to open a business, either stand alone or as part of another enterprise (think of the fast-food chains that team up together in urban and suburban locations), give us a call.  And, if you want to become part of the great wave of small business owners, here's your chance.  We're ready to help.

Follow the Out-of-Town Investors

If you drive around New Haven these days, you will see building after building that is being renovated, remediated, or repurposed.  Many of them have been bought by investors that can no longer afford the prices commanded by properties in New York City or Boston.  Once someone makes his or her first purchase, there is a good chance that he/she will continue to buy other offerings, especially given the prices on some of the older industrial buildings.  In addition to the lower acquisition costs, it's also cheaper to renovate here than in a bigger city. 

Some of these purchases are being driven by the desire to diversify investments, while some are opportunistic, and others are for specific purposes. The rash of new rental options will inevitably lead to other retail and commercial needs in those neighborhoods.  There will be money made, as early adopters get ahead of the curve. Organizations and companies that are renting should consider now the possibility of buying, before prices rise further, even though current rental rates may seem like (and often are) a bargain.

What does this mean for those of us who live here?  Will we continue to watch as others grab what's on the market?  Or will we make the classic mistake of sitting on the sidelines until it becomes so clear that outsiders are making money, that we buy at the end of the cycle, or buy something that is more problematic or risky?  Only time will tell, but it's our job to point this trend out, and the job of readers to think about their own portfolios.

Web Traffic Patterns

We have always known that people take a few months to think about a real estate transaction, so that we need to pay more attention to visitors to our site than someone selling sneakers or office supplies, but we didn't have much empirical evidence to go by.  Now we have more.

We track all of the new and returning visitors to our site, as well as all the visitors who click on our website from a search.  Although we know that our region is education-driven, and therefore not, in many cases, the usual seasonal pattern found elsewhere, even we were surprised to learn the two-week period in which the greatest number of new visitors appeared.  Can you guess?

It was during the last two weeks in January!  That means that, despite weather and paying off tax and holiday bills, more people are starting a property search right after the first of the year than at any other time. Our greatest number of clicks from Google last year came in February and March, suggesting that the search for specific properties might be ramping up just after the new visitors started the process.  

Since all industry data suggests that most property closes in the late spring and summer, except for a surge in commercial closings at the end of the year, this would suggest that, if you are a seller who wants to have the broadest exposure for your property, you need to list it now!  Not next month, not when the days are longer or the weather improves, but now.  This is when people want to look at real estate, at least in our region, and we should be giving them what they want, when they want it.  Because that's how property gets sold!  So act quickly, for maximum results.

Central Location

We have seen a surge in the popularity of old industrial buildings this year.  Some of them are being used for residential repurposing, but many are put to use as warehouses.  Despite the complaints about our highways, Connecticut is located in a region where most places are accessible easily by truck, and rail goes through the state in more than one direction.  While we have become positioned as an unattractive place to do business, storing and shipping from here seems to be the exception.  Fewer jobs, especially fewer high-end jobs, are created with warehouses, but there is also less risk for the buyers or tenants.  In addition, some of those old industrial facilities have environmental problems, which are less of an issue when they are being used as warehouses, as opposed to living spaces.

Will our resurgence on the warehouse front lead to other development, or further investment in Connecticut?  It's too soon to tell, but it's good  news for those who have owned--and often sat on--those buildings for years now.  We're happy to advise you, if you are such an owner.

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?

Under All This Land

I taught the Ethics course required by the National Association of Realtors this week to commercial Realtors from around the state.  The Code of Ethics has been around since 1913, and we go over it in continuing education throughout our careers.  It's always a good reminder, although the application of  the Golden Rule would be enough to cover most situations.   I was reminded that the Code begins by saying "Under all is the land", and that underscores the fact that what Realtors do goes to the heart of the American dream and way of life.

Wherever you live, and wherever you work, play, pray, and shop, you are in buildings and homes that are built on the land that makes up our country.  Realtors and real estate are integral parts of putting families and businesses in homes and commercial spaces, which is an important why we do what we do.

 And it's one of the things we're grateful for this Thanksgiving, and every day--our clients and their trust in us. We are happy if we have been a part of locating your holiday table in its current location!  May your Thanksgiving be full of peace and joy, with thanks and best wishes from all of us at Pearce Real Estate.

Election Pause?

Many real estate professionals claim that there is always a hiccup in the market before an election, as people try to figure out what will happen in either scenario. It's not clear to me that it's happening this time, although you couldn't have a starker contrast between two candidates than we are being presented with this time!

One thing that is clear is that interest rates are never lower than before an election, especially in a presidential election year.  This time is certainly no exception, and that should spur action under any vision of the future.  Over the long run, it matters more what your interest rate is than what you pay for the property, within a certain range. 

Besides, how do we even know which candidate Wall Street will favor?  Hillary has most of their contributions, and Trump is a businessman, like most of those running big companies.  Either one should have their fair share of support, meaning that the stock market should not react wildly to either outcome. 

Well, here's one time when I'm clearly on the line, since we only have two weeks to go, before we find out what happens.  In the meantime, go forth and buy or sell--you should be fine, in any event!

Any Plans to Buy or Sell in this Tax Year?

It may seem ridiculous for me to be posting on a hazy, hot, and humid August morning that time is running out for real estate sales this year.  However, much of commercial real estate is driven by tax concerns, and taxes play an important role all the time, even when the reasons for activity relate to other concerns.  Therefore, it's wise to consider that it takes a long time to close most properties that need environmental testing or financing, so now would be the time to get moving, if you intend to accomplish anything by the end of 2016.  In the real estate field, we try not to count on much getting done after mid-November.  Since that is about ten weeks away, I'm not being overly cautious to say that Labor Day should be your signal to ramp up your search or your sale.  Even leases can be affected by the calendar year for taxpayers, if you are interested in deducting costs of fit-up or commissions.

So time's awasting--get moving!

Recent Statistics for Connecticut Commercial Real Estate



Services for City Dwellers

"Walkability" is near the top of the list of attributes for residential housing these days.  Everybody wants to be able to walk--to work, to restaurants, to public spaces, and to culture.  Even towns now advertise when something is walking distance from whatever town center is closest.  New Haven is enjoying a boom in high-rise living, with prices headed up and supply being absorbed ahead of anyone's predictions.  What does that mean for our commercial sector?

In prior days, retail meant big box stores that could be accessed with little driving time, and abundant free parking on site. That's still true if  you are big enough--IKEA comes to mind.  For almost everyone else, retail now means the old-time corner store, the local market, the neighborhood bar or restaurant, and farmers' markets nearby.  With all the new housing downtown, there are still services needed locally--in this case, hyperlocally.  What about pets?  Drugstores? Grocery stores? Even gift shops?  We've got something for everyone, but there's room for more.  Tenants and downtown homeowners expect to pay more for convenience, and they will.  More boutiques and pop-up stores are in our future, as our more of the ever-expanding restaurant and bar scene, which already draws from around the state.  It will continue to do so, and visitors will complement the city natives who patronize those places. 

For investors or developers, there is money to be made.  Property now seems reasonably priced for commercial, and it can easily be made into space for the uses that walkability-minded folks require.  Think about it--but not for too long, or the window will close!

Follow the Money

Greater New Haven, and especially New Haven itself, have become places where investors are looking at affordable properties.  Many have been priced out of New York and Boston, but know that our market lies just between those two cities, and that real estate is way cheaper here than in those two markets.  Therefore, many buyers have swooped in and bought (sometimes even sight unseen) buildings, especially multifamily housing units.  New Haven had the lowest apartment vacancy rate in the country, so it makes sense that investors would seize on that to buy or build.

But that also opens another avenue, and perhaps one more suited to local owners and investors.  What services will those apartment dwellers need?  We wouldn't have the infrastructure in place for all those new units, so there's a big opportunity.  Would you like to own or develop retail, restaurants, service economy space, or parking?  Here's your chance!  Be the person who provides the missing links for the new citizens of the city, and you may be handsomely rewarded.

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!

New Discussion of Business Taxes

Governor Malloy has announced that he's going to meet on the budget and taxes, and that everything is on the table except tax increases.  Even the fact that he's framed it this way should help our business climate.  For too long, people have been pointing to Connecticut as the state that wants to drive corporations and jobs out.  The legislature has often called for business to pay more, even though we are already more expensive than many other states.  Now, finally, maybe thanks to GE threatening (or intending, many posit) to move its headquarters, we're getting somewhere.  Hey guys, we are important to you--you should be nice to us!

Pearce RE Selected to Join CT’s Tribal Nations’ Push to Save Jobs

At a press conference held Thursday afternoon at the Connecticut Capitol, the Mashantucket Pequots and the Mohegans, Connecticut’s two sovereign tribal nations, joined forces to save jobs in the State by creating a new gaming facility to be built north of Hartford. I am delighted to announce that Pearce Real Estate has been selected by MM4CT Venture, their joint enterprise, to administer the Request for Proposals from towns and municipalities that are interested in being home to the new facility. We are honored to be part of their important efforts to save and grow jobs here, and for citing Pearce as a woman-owned business with outstanding credentials, superb knowledge and experience in the Connecticut landscape, and a stellar reputation.  Importantly, they appreciate that we are a Connecticut company, that we all live and spend our money here, and have a vested interest in the economic health of our State.   

Thanks to Chris Nolan, Carl Russell, Virginia Vinci and Lyndsay Cuomo for working with me to respond to MM4CT’s request for a proposal in such a quick, positive and professional way. 

Additional details about timing and the process moving forward will be released in the coming weeks.

Barbara

 

Hartford Being Sold to Out of Town Investors?

Big Hartford office buildings are now such a good deal, per square foot, that they are attracting buyers from out of state, many of whom may have been priced out, or have priced themselves out, of the NYC market.  Since most real estate markets are cyclical, and since office space can obviously be leased for less if it is bought for less, it seems reasonable to think that these investors will realize gains in the medium and long run. 

Will other markets in Connecticut follow?  It also seems sensible to think that, the closer to NYC something is, the more it will eventually be worth.  There is a clear correlation with housing prices, based solely on distance from Manhattan, and it likely holds true for commercial buildings as well.  So will New Haven also see a boom in out-of -town buyers?  That seems already to be happening, and will probably continue.

Moving Chess Pieces

What do restaurants and technology/biotech companies seemingly have in common?  They both seem to abruptly change status.  Restaurants, for obvious reasons, don't ever seem to give a lot of notice about closings, and so closures come as a surprise.  Tech and biotech companies, which are clearly hot properties, merge or move on a dime.  Buildings which have just finished fit-up, or undergone extensive renovations, may suddenly find themselves empty again. The rent cost doesn't amount to enough to factor in heavily to other synergies of moving. 


Lately, we've seen both phenomena in our market.  Long-term, established restaurants have closed, and new lab and office space has re-entered the market.  The latter, particularly, could represent opportunity for investors and users to pick up square footage at a relatively low cost.


Nothing is constant except change!