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.

Connecticut's Chickens Come Home to Roost

Dire predictions of the future of Connecticut and its economy have been surfacing recently, with increasingly strident views about our prospects.  The latest version, from a UConn professor, Fred Cartensen, and the head of CAI (the Comeback America Initiative), David Walker.  The latter was the former Controller General of the U.S., and the former is the head of the CT Center for Economic Analysis.  They cite, as others have, our long-term lack of job growth, but focus on the debt per person owed by Connecticut citizens.  We owe over $50,000 per person in future obligations of one kind and another, especially in unfunded or underfunded retirement and pension plans for teachers and state workers, which is the highest debt ratio in the country. The second worst state owes $38,000 per person, and other states cited were around $6,000 to $8,000 per capita, with some states actually having a positive balance.

Accordingly to the two gentlemen above, there is no way that we can go much longer in this state without running into major problems.  They call Connecticut a big suburb, winding around "sinkholes" of the inner cities, but urban problems are everywhere.  The difference here is that we are pretending not to have promised money we don't have.  Now, that issue is affecting our debt rating, our economic development options, and our future as a state.  It's time to wake up and face the music, before our budgets become completely unsustainable.

Doing Business in Connecticut

According to recent economic reports, Connecticut is the fifth most expensive place to do business.  It also seems to have costs that are rising more quickly than the same costs in other parts of the country, where the official CPI is 1.7 % for 2012.  Since my earlier blog reported that Connecticut also is lagging jobs recovered and in coming out of the recession in general, where's the good news?

The good news is that the state knows all of this and is determined to improve our statistics.  The Governor has been aggressive in trying to--and sometimes succeeding in--luring new companies to Connecticut.  The most recent one was from Europe.  He has also made a specialty out of alternative energy, and that is a booming industry.  Catherine Smith, the DECD Commissioner, has gone all over the state, speaking and listening on the topic of doing business here.

Some problems won't change.  It is always going to be more expensive to heat buildings in a northern climate, and old infrastructure is less efficient than that found in regions built up more recently.  However, it shouldn't take more to get a permit here than elsewhere, nor should the regulations imposed on business be more onerous.  It's hard enough to compete against the rest of the world, without coming in behind the rest of the country on certain metrics.  Our Governor seems to understand this, and let's hope that he can address the issues, and create a climate of innovation and renewal for all business.