What Shape Will the Recovery Curve Take for Commercial Real Estate?

This is a somewhat misleading headline, since I am neither a professional economist, nor a seer.  The point I want to make, however, is that there is much more activity than there was after the abrupt economic debacle of 1987, or during the Great Recession of the late "Aughts".  In those two prior times, all interest in viewing real estate, or in buying or renting it, went on hold as soon as the stock market collapsed.  It took many years, in each case, to revive demand, or begin to create supply.

Right now, we are seeing strong activity in the industrial market, as well as demand in investment real estate continuing along.  Retail and traditional office buildings have clearly been harder hit, so it will take longer to see what happens in those sectors.  The fact that sales and leases are occurring, however, shows that this recovery won't be as delayed as the other two.  It may not mean that prices stay up, although we haven't seen that problem yet.  

One big factor is that some parts of the national economy, led by ecommerce, and followed closely by PPE manufacturers, have every reason to be expanding.  The pandemic part of this crisis, leaving the economic issues aside, have created opportunities for new businesses and expanded services.  Some of the current trends seem likely to persist, even if the country completely opens up by the end of the summer.  While things could certainly shift for a number of reasons, nimble entrepreneurs and corporate leaders are moving quickly to fill demand. 

The intervention of the government in the early stages may also mean that banks are more inclined to lend.  The relief provided so far gives financing firms more assurance that they will eventually get paid.  That wasn't true in the last recession, and it was recent enough that we seem to be remembering those lessons.  

Let's hope that I'm right, and that we see strong sales and leasing as restrictions lift.  Given our large role in the overall economy, that would be good news for everyone.

Where Are All the Cranes?

I've been in Washington, D.C. and Boston recently, and both are hard to recognize from days past.  There are cranes everywhere, and new neighborhoods are springing up, while the old ones are either gentrifying, or just increasing in price.  It's amazing to see, in the case of Boston, what a difference 100 miles can make!

Both of those cities have been enjoying boom times, and Boston has been an outlier on the upper end of the growth curve in New England for some time.  It has been successful in recruiting biotech companies with high-paying jobs, despite high housing prices, in part because it has reached critical mass in that field.  Two-career families can both find employment, and there are lots of research universities around to feed the fire.

Could New Haven become a mini-Boston?  In some ways, it already is.  Cultural opportunities and the percentage of academics in the population surely rival Boston.  Proximity to NYC is important, and we have that.  What do we still need?  More business and job growth--when Boston, in what's long been called Taxachusetts, seems better from a tax point of view, you know you're in trouble.  Better transportation--investment in roads and railroads, plus expansion of Tweed's airline service.  And, of course, a more positive reputation--are you listening in Hartford?

Where's the Product?

We have one broker who has five needs that he can't fill, because what his clients want to buy or lease is not available in our market.  In residential real estate, that would constitute a seller's market, since demand exceeds supply.  And this is despite horrible press for our State and its fiscal condition and business policies.  It does appear that businesses who are staying in Connecticut are short of space. 

Can anyone help us out?  We need land, leased or sold, on which to build pre-engineered buildings with 5-10,000 sf increments.  Check and see whether you have any available, and call us!

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.