Opportunity Zones Draw Interest

400 people crowded into the Omni Hotel this week, to hear about the opportunities available in, well, opportunity zones.  Governor Lamont gave an address, encouraging the use of the zones to develop Connecticut's cities, and telling the audience that he would make sure that 15 minutes got cut from the train time to NYC.

Although the State would like to see people investing in businesses within the zones, most so far have concentrated on real estate holdings.  It is somewhat of a surprise to see how many big players are looking at this new sector of the market, but it isn't clear that they will snap up the smaller choices.  That's where the average investor comes in, especially when he/she knows the local area.

The length of time for most investments--ten years or more--will discourage some, but many will be undeterred.  When the current peak prices in the stock market are taken into account, a longer term with more reasonable returns seems safer.  Most of the bigger firms are expecting to get a return of 10-11% per year, over a decade.  It behooves those of us who live here to snap up some of this product, before others swoop in to claim the rewards.

Too Early to Plan Around the Election?

I've heard a lot of discussion lately about planning real estate decisions vs. a vs. the next presidential election.  While we all realize that speculation is often just that, it is true that people do try their best to suss out what they think will happen to the economy, and therefore to real estate, if one or another person becomes President.  Obviously, many thought that Trump, as a real estate developer, would make choices that would be good for real estate investment on every level.  While that has not been universally true, it does seem true that, even in Connecticut, where 47% of those polled recently said that they were thinking about leaving the State within the next five years, there is a feeling of being better off than four years ago.  Is that because we are four years further from the last recession, or because interest rates and unemployment are low? Or is the scary stock market leading to moving money to "safer" places?  It doesn't really matter.  Real estate seems to be in favor as an investment again.

I've written about the opportunities buyers are finding along the Shoreline, now that hurricane fears seem more distant, and summer family gathering places more important.  I've also talked about the potential for real estate investment, especially in warehouses and flex spaces, based on location, and the type of needs that follow residential apartment expansion.  All of those things are true.  It does seem to me that our market in general is somewhat better than in other places, mostly due to the lack of a run up causing a subsequent downturn.  Whatever the cause, we are behind the curve, as we have been for a long time, and for now that is a good thing.

Should you wait for November of 2020?  It's a long way away.  Weigh your personal life goals against the choices, and make a plan.  Personally, I think there are too many unknowns, and the knowns tend to favor real estate investment now.

Still More Apartments

Every time we turn around, someone else is announcing a new project with rental units.  Some are in Hartford, some in the suburbs all over, but New Haven is garnering (still) the biggest share.  There seems to be no end to the demand, or at least, we haven't seen it yet.  We all know that it will come, but who can say when the demand will dry up?

There are a few signs of increasing competition for tenants, which would indicate that the peak has passed.  However, we all know that the height of demand is usually demarcated in the rear view mirror.  Real estate is always cyclical.

This begs the question, however, of the other needs that all those tenants will have.  They tend to have high utilization of restaurants, entertainment, and convenience services.  The profile of a renter is different from that of an owner, if only because they aren't spending time or money on home maintenance or improvement.  That leaves them more time to work or play; if it's work, that leaves them also with more money, and a need for time-saving services.  Food places that deliver, pet and beauty options, and retail choices within walking distance will all increase. People who walk places can also drink in bars, since they are walking or Ubering home. Although they have been opening up regularly, the demand may be outpacing the supply, given all those new renters.

Why not try to be ready with commercial offerings. that will be ready when the units come on line?

Looking Up For 2019?

Our Commercial Department meeting this week was as full of listing and selling reports as we've seen in several years.  Agent after agent reported listings, and then stated that they were under contract.  This was true regardless of the part of the State, the type of property, and its use.  It seemed to us as though the first of the year brought a rush of people deciding that they had vacillated long enough.

To some extent, sellers planning to leave the State will also cause this kind of movement, so it may not all be good news, but it sure felt like it to us.  Even the suggestions from others around the table were positive, as to the likelihood that things would sell.  And this was all true despite the outside temperatures at 15 below with the wind chill, on the morning of the meeting. 

No one would be happier than we would be, if Connecticut were truly seeing a new beginning.  Between investment from those priced out of New York and Boston, users finally pulling the trigger on needed space, and startup businesses, there's a lot to spark the market. 

If you are a seller, consider listing now, while demand is strong and supply has not caught up.  If you are a buyer, don't hesitate.  Remember, he who hesitates is lost. 

Reaping the Rewards?

Now that the stock market has started to rally so strongly, maybe it’s time for people to take what they’ve made, and buy real estate instead.  In our region, prices are still very low, compared to even twenty years ago.  We used to have average home prices well above the national average, so that job recruits moving here were worried about finding affordable housing comparable to their previous homes.  Now, we are very close to the national average, and we haven’t gone up, in some areas, enough to cover the declines of the last decade.  Commercial prices have been bumping along, also not moving up over time.  Some industrial buildings are at prices equal to those of years ago.  While some towns have a shortage of smaller commercial spaces, others have empty big box stores, many of which could be repurposed.  We are very short on affordable housing in our region, and the gap keeps growing, as rents continue to rise.  Even as housing prices for homes have declined, rents have doubled, and many tenants are paying a percentage of their incomes for rental units that is considered to be onerous.

 

What does all this mean for buyers?  Real estate is, and always has been, cyclical to some extent.  Through the boom  years, we would say that what goes up, must come down.  Now it seems that the opposite should also be true:  What went down, will come back up.  There is still an opportunity in our area, which isn’t true in much of the country—especially the coasts—to get normal appreciation on purchases, given the current state of prices.  We know that investors have been increasingly drawn to our state, because of the high prices in Boston and NY.  Why would locals not invest as well?  While we’ve been reading about the woes of Connecticut, others have been coming from out of state and out of the country, and buying and buying.  With our deeper knowledge of the local market, we should be able to do better than they could.  So let’s make a resolution in 2019:  Buy local!

Racing for Daylight

This is the time of year where you need to make a drop dead decision ASAP, if you plan to close this year.  Although there are only four weeks left as of this writing, it's amazing how much faster something can happen if everyone gets on board to do so early.  Bankers, for instance, often have bonus plans that would give them that extra boost to push a transaction over the finish line.  Realtors certainly do. Owners, of course, have tax consequences that would favor closing in one year over another.

If you think it's too late, it's still worth checking.  People travel less before the holidays, at least for business, so those who are around may be more reachable and available.  It's just true that, when you put a rush on any order, everyone moves it to the top of the list.  So don't despair if you have left a sale for too late--just act quickly!

Favored by Fortune

Those of us in Connecticut real estate would like to thank Boston and New York.  If they weren't so expensive, we might not be seeing the spate of sales that we've had in the past few months.  Although Connecticut faces fiscal and policy challenges, its location between two major centers of growth means that it benefits from the rise in prices seen in the two cities that bracket it.

Investment property is clearly drawing attention from buyers priced out of the Boston and NYC markets.  We are starting to see the same dynamic in demand for user properties, distribution facilities, and land.  Even home prices are beginning to reflect first-time buyers who cannot afford New York, just as we used to see.

It's impossible to predict how far the sprawl of metro Boston will end up going, but Connecticut will surely reap at least some rewards.  Fairfield County is already considered a suburb of New York, and that will continue.  If rail is upgraded, which we are all waiting for, that spillover will explode.  In the meantime, we can just be happy to see a great increase in commercial activity.

Think Ahead

I've been posting recently about the lack of listings in many parts of Connecticut, and about our need for certain types of property in particular.  What we haven't stressed is the lead time for many sales to consummate, given environmental and zoning concerns, plus financing contingencies and the usual delays and detours.  Given the demographics of our state, and some of its fiscal issues, we know that there are lots of people out there that may have property they hope to sell in the coming years.  Many of those putative sellers should be talking to us now.  We have investors who are flexible about occupancy and who might be likely to prefer a seller who wants to continue to use the property for a period of time.  We have buyers with longer lead times that would be interested in knowing what would be available at a point in the foreseeable future.  We have tenants in leases that are not yet up, but who are looking to move at the end of their terms.

All of this is to say that there is no time like the present to think about the future!  Call us today to see what your property is worth, and to strategize about the best time to market it for best results.  The answers could surprise you.

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?

The Irish Experience

We just got back from a quick trip on the new flight from Bradley to Ireland, and it was a terrific experience, but also instructional.  Dublin is a city that, in some ways, would remind people of New Haven, but with more redheads.  There are lots of students everywhere, a shortage of rental housing, a big university right in the center, new tech companies starting up, and more restaurants than you could ever believe would be needed (and mostly all full).  Plus lots of beer--recently often craft beer.  Also like New Haven, there has been little commercial building over the past ten years, while the economy lagged.

What's different about Dublin from New Haven?  Well, it's a capital city, with all the economic power that that brings.  It has a major airport, with easy, and cheap, access to many parts of the world.  It's part of the EEU, and next to Britain, which just voted to leave that organization.  It has great public bus transportation with the city and around the country, in addition to rail. It has lots and lots of tourists.  And it attracts industry from other countries, including European headquarters of global firms.

Can we learn anything from their experiences?  After all, they've had a rough ten years as well, and many types of property have declined in value.  It's also much harder to get financing there, and lots of people can't get it.  However, if we work on job growth, transportation infrastructure, and attracting new industry, maybe the people (even the redheads) will come.

Finding What's Not There

Usually, when you are looking for something to purchase, you expect to choose from among the options available, either at a retail outlet, or on line.  Real estate has become very different these days.  There is often a disconnect between what sellers are offering, and what buyers want to buy.  And that's where the agents come in.


In the olden days, we sat down with people, and showed them a physical book of properties available, or took them in our cars to see what was listed.  Now, we've become experts in finding what is not on the market.  We frequently scour an area, or brainstorm together at an office meeting, to try and locate what a buyer or renter is hoping to find.  It's not uncommon for us to chase down leads, or contact out-of-town owners upon seeing a half-empty parking lot or signs of disuse, in order to present more choices to clients. 


That's where the distinct advantage of a local company comes in.  We are big enough to network all over the world, to promote listings on line, and to have the technology necessary to accomplish transactions.  However, because we know Connecticut, and have our whole team of local experts, we can search with purpose, having a good idea of where things not on the market currently may be located, or carved out of a larger property.  In one recent search, only a couple out of almost 20 properties were being marketed for sale or lease.  The others came through networking with owners, agents, State and town officials, and each other.


That's the future of real estate brokerage--agents as consultants--and we are in the vanguard.  We advise people who have found buildings and land, people who are looking, and people who haven't looked.  We seek out alternatives, identify and sometimes eliminate obstacles, and smooth the way with regulations.  It's the best way for us to work--as partners with our clients--and the best way to access our services.  Sometimes change really is good for everybody!

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!

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!

Lots of Hits

For all that Connecticut is being labeled as the place to leave for doing business, we are getting lots of inquiries about our listings.  In fact, "commercial real estate" is the number one thing that people Googling Pearce type into their search line.  We also get as many Ready Chat leads (those who talk to the little person who appears on the screen when you get to our site) for commercial real estate as we do for residential.  Since that doesn't correspond to what the general impression of the state of the commercial market is, I thought it was worth passing along.

People looking at properties on LoopNet are also a big source of leads for our commercial agents.  Those who search through LoopNet can be either local or not.  While calling or emailing about a property is obviously not the same as buying it or leasing it, and not all leads result in sales or leases, it's a promising start.

So feel free to join the crowd, and look for us at www.hpearcecommercial.com. 

New Haven area outperforming rest of the state in job recovery (From New Haven Register)

Article written by Luthoe Trumellle of the New Haven Register, click here to view on newhavenregister.com

Sometime between now and June, the New Haven area will achieve something that so far has eluded the rest of Connecticut.

The area economy will have recovered all of the jobs it lost during the last recession. Through November, New Haven and surrounding communities had recovered 94.3 percent of the jobs that were lost, said Donald Klepper-Smith, chief economist and director of research for DataCore Partners as well as the author of the New Haven Register's economic scorecard.

For the second month in a row, the scorecard for November showed six of the eight indicators headed in a positive direction. "New Haven is clearly out-performing the state as a whole," Klepper-Smith said. "This is a continuation of what started happening earlier this fall and it should continue well into 2015."

The New Haven area continued to benefit from continued growth in its labor force during November compared to the same period in 2013, he said. The biggest employment gains came from the food service and hospitality sector, which added 2,100 jobs in the past year, as well 1,700 from health care and an increase of 200 workers in education.

The only two economic indicators that negatively impacted the region's economy in November, according to Klepper-Smith, were real disposable income and consumer confidence. With a prolonged decline in gas prices and oil prices expected to continue, he said New Haven consumers will see more discretionary income available in their pockets every month.

"We currently have the price of oil at about $46 per barrel," Klepper-Smith said. "There's not one economist in the United States that would have predicted that a year ago."

The New Haven area continues to benefit from an improving housing market, he said. The 14 towns included in the new housing starts indicator in the scorecard saw a 34 percent increase in the amount of activity, Klepper-Smith said. And the median single-family housing price in November rose to $210,000, up $5,000 from where it was a year ago.

Robert Wiedenmann, president of Sunwood Development in Wallingford, said there appeared to have been a bit of a slowdown in new home sales during the holiday season. "There were a lot of people attending our open houses, but nobody was buying," Wiedenmann said. "We didn't know whether it was the typical slowdown we see around the holidays or the start of something bigger."

But new home sales in January have started with a surge of activity, he said. "We're getting people who have been on the fence for months (about buying a new home)," Wiedenmann said. "We're seeing a lot of empty nesters come in who are looking to downsize into smaller homes, but are expecting the kind of amenities that you can't get with an existing home unless you do a lot of renovation."

What a Bargain

When I look at what most items cost now, and I think about what we paid for them when I was younger, most things seem very expensive (gas especially--there was a gas station near my high school boyfriend's house that was having a gas war with another station, and it was 16 cents a gallon!).  A few seem not to have gone up nearly as much, but I'll bet that New Haven commercial real estate ranks right near the top.

In the late 70s and early 80s, industrial real estate rates were around $4/sf, and today you can still find places for under $5/sf.  Office space in the 80s could go for around $20/sf, and you can find some in that range now.  The comparisons may not be building to building, but the value of today's pricing is clear, especially when you look at the expenses added on.  Taxes, insurance, and utilities are vastly more now than they were then, and can dwarf the actual rental payment.

So, if you are, like I am, getting to the point when you are in danger of sounding like an old coot when you talk about the "good old days", don't forget to think about real estate prices.  You'll sound current instead!

Busy, Busy, Busy

Although we can't yet see it in sales results, many of us are busier than we've been in years.  One agent recently told me that he has more going on than he's had in 20 years!  What does this tell us?  It says that people know that it's a good time to buy (true), that rates are low (very true!), and that the economic climate is improving (true).  Businesses are busy, but they are still not pulling the trigger on space.  Maybe they are too busy to do the work, or they aren't confident that sales will improve and stay better.  Whatever the reason, we are in the part of the cycle that reminds me of my old days of rowing college crew--the stroke has to raise the stroke by putting his/her oar in the water first and doubling down until everyone else catches up.  That's where the market is--we are doing the work, and the results haven't appeared yet.  But it appears that they will, meaning that those who rented or bought sooner will do better than those who waited.  Where will you be?

Greater New Haven Regional Update

Click here to view presentation

Our Newest Venture--Pearce Consulting Services

Pearce Commercial has expanded!  We've decided that there is a hole in the market, for a service lacking in today's complicated real estate world.  Much of the property being unused or underutilized in the commercial arena in our region belongs to corporations or municipalities, that aren't disposing of the property because of something that needs to be done, either in terms of zoning, rehabbing, or environmental cleanup.  Pearce has put together a group of experts that can guide that process from appraisal and evaluation through rezoning, marketing, and closing, and much, if not all, of the funds needed can come out of the proceeds at the closing.  In addition, many of these sites can then go back onto the tax rolls, and can employ workers and add to the grand list.  Some of our team are Pearce agents, allowing owners to pay for services through the commissions generated.

We have assembled construction, brownfield, wastewater, appraisal, financing, permitting, and marketing experts, who can provide one-stop shopping for all of those specialties, with one call to us.  Also, we can tailor the team each time, to offer the services needed to reclaim the property.  We know that it must be a good idea, because, after we formed our group, we noticed that another such firm was assembled in another part of Connecticut.  It's clearly an idea whose time has come, especially in an era when firms and cities and towns lack the resources to keep specialized experts on staff. Call us for details!

New Haven has lowest residential vacancy rates in the country in 2013

As of the end of 2013, New Haven had the lowest apartment vacancy rate of the 79 cities followed by Reis Inc.   New Haven's vacancy rate was 2.2%, down from 2.6% one year before.  There are many reasons for this, including the large student population, especially in graduate schools, which have very little campus housing.  Also, its location on a major rail line makes New Haven a great place for people who work between New Haven and NYC to live, considering the ease of commuting and the amenities and nightlife offered in the city, particularly for young professionals.  In addition, the high cost of housing means that more people will choose to rent instead of buy, pushing up demand in the rental sector. Average rents in the area were $1154/month last year.  Hartford was the sixth tightest market in the survey.

What does this mean for commercial real estate?  Retail and office follow housing, since people living in a region demand services and often choose more convenient work environments.  In New Haven, we are seeing a major suburban employer, Alexion, moving downtown, both for the proximity to Yale and Yale Medical School, and for the benefits employees have for lunchtime and after-work dining, shopping, and entertainment.  Also, younger employees will usually choose an urban setting when possible.  Given the number of hours we all spend at work these days, having the ability to do errands or grab a meal is a plus for most people, and retail uses will prosper with higher levels of renters, especially since those renters are disproportionately clustered at the empty nester and young professional ends of the housing cycle, both of which are groups that eat out and go to events more often than suburban parents with children.  One study quoted to me claimed that approximately 30 jobs in the service sector are created for each high-income renter downtown.  New Haven still is under-retailed, according to national statistics, so this creates an opportunity for real estate investors and owners.  Please call any one of our commercial associates, if we can assist you in prospering from this market condition.