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.

CERC survey: View of CT realty upbeat

Written by Gregory Seay

Connecticut landlords and other realty professionals feel better about the near term prospects for the residential-property market than they do the commercial-space sector, a new survey shows.

According to the Connecticut Economic Resource Center (CERC), its latest SiteFinder semi-annual online survey of Connecticut commercial real estate conditions indicates that respondents are generally positive about markets, except for the office market and overall economy.

The 72 respondents included brokers (65 percent) and economic development professionals (22 percent) from Connecticut and out-of-state. Almost one-third of respondents (32 percent) were from New Haven County.

Respondents generally rated local market conditions as satisfactory, with a majority saying the industrial, investment, and residential markets in their respective geographic areas were "excellent" or "good" (53 percent, 50 percent, and 62 percent, respectively).

Respondents were more pessimistic about their local office markets, with one-quarter rating it as "poor" and 56 percent rating it as "fair."

At the state level, residential was the only market for which a majority (51 percent) said it was "excellent" or "good." One-quarter (25 percent) said the office market was "poor," and one-third (30 percent) said the overall economy was "poor."

Respondents are also seeing tangible improvement in the real estate markets in the state. Over half of respondents (57 percent) reported seeing an increase in buyer interest or inquiries compared to this time last year.

Nearly half (48 percent) also reported an increase in the number of deals. There was an increase of those reporting increased number of deals (from 38 percent) and buyer interest or inquiries (from 48 percent) from the first quarter of 2016.

"As the need for large office space continues to decline, the demand for modern industrial manufacturing and distribution space continues to increase,'' said CERC Real Estate Program Manager Erron Smith. "End-users have communicated that they are willing to pay a little more, if it translates into occupying a space that can satisfy their operational needs."

More than half of respondents thought sale prices for industrial, retail, investment, and residential properties would increase in the state in the next three months (63 percent, 51 percent, 61 percent, and 57 percent, respectively). Most expected this gain to be less than 5 percent, but more than 10 percent of respondents thought there would be a gain of at least 5 percent in sale prices for residential.

"There was a similar pattern for lease prices, with expected gains in sale prices for industrial, retail, investment and residential, and a loss for office," said Alissa DeJonge, CERC's research vice president.

Nonprofit CERC is a public-private partnership that provides economic development services. Its SiteFinder Real Estate Survey measures the health of Connecticut's commercial real estate market.

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 Multifamily Category is Still Hot

When I look at the LoopNet list of the most-often viewed properties in Connecticut each week, I am struck by how many are multifamily properties  (and also about how few are ever industrial, where there is a big supply).  Week after week, thousands of people view residential investment rental properties.  Why the appeal, and why is it not waning?

I think that the appeal is like all of real estate--a tangible investment in a time of uncertain returns in many investment categories.  It also is the type of investment where those who are handy, or have some free time, can improve properties or cut expenses, and raise returns, something that cannot be done with stocks and bonds.

But won't the supply exceed the demand?  People don't think so, and that's coming from two ends of the age spectrum--millennials and seniors.  Millennials, with little desire for home chores or fixed commitments, and with a lot of educational debt, are renting in bigger numbers and for longer.  And downsizing older adults are no longer finding a stigma in rentals, so they are often selling big homes and renting in urban areas especially.  Since Connecticut has a very high average age, we have a lot of those people.  Also, professionals who move here to take jobs are renting much more often.  They are renting more everywhere, for the reasons above, but our state has a very high percentage of people who want to avoid what they see as an illiquid investment--an owned house--and high estate taxes, so they consider buying somewhere else, or keeping the house they had elsewhere, and renting here.

Will this continue?  It seems to be holding up for the present, even in New Haven, which has loads of new product coming on line.  It may well be that, at some point, those who are slumlords, or who have not reinvested in their properties, will be forced to lower rents or make improvements, in order to compete with the newer buildings, but even that hasn't quite happened yet.  So the interest in the segment continues. 

Investment Fever

The recent travails of the stock market have proven to be a boon for investment real estate.  The appeal of being able to see what you own, and touch it, is proving irresistible to investors from here and abroad.  We are seeing feeding frenzies for apartments, where buyers are making offers sight unseen, and office buildings, where we are surprised at the final sales prices.

Investors are being priced out of NYC and Boston, and are turning to us to look for available product.  We are happy to oblige, and are getting used to learning the nuances of moving money from country to country.  It's nice to know that the United States is still the place where people feel that their money is well spent.

If you are a buyer, you have new competition from overseas.  If you are a seller, you have new buyers.  This may be the time to cash out, and it may not matter whether you own apartments, retail, industrial, or commercial real estate.

Market Volatility

When the stock market is at its most volatile, people become concerned--sometimes obsessed--with the value of their portfolios.  Some check the numbers every day, and talk about changing allocations.  Yet shouldn't those same people look at the value of their real estate holdings?  While they don't jump up and down in price in the same way, sometimes we don't check the values until we are thinking about selling.  Assessing real estate value should be a part of any portfolio analysis.


When financial instruments change in value, the percentage of your holdings in real estate can change at the same time, either up or down.  Many people think about buying more real estate when they feel less confident in the markets for other types of investments, but sometimes just the passage of time will move the needle on those percentages.  Could it be time for you to call your agent, and see what your properties are worth today?

First Entry

Welcome to the new and improved Pearce Commercial Real Estate Website, and to my commercial blog.  While I have been blogging for a long time, this is my initial foray into exclusively commercial material.

It's always an interesting feeling to be writing in cyberspace.  You have no idea who, if anyone,  is reading what you post.  Nor do you know, unless they contact you, what they think of what you say.  That's my way of saying that I'm going to write about whatever occurs to me that I think might be useful or relevant to the potential audience, and I would be delighted to get feedback from reader about potential future topics.

By way of introduction, Pearce Commercial Real Estate covers most of Connecticut, largely excluding Litchfield and Fairfield Counties.  We do sales, leasebacks, leases, exchanges, and buyer brokerage for industrial, office, retail, and investment property.  We also have a large residential department, and joint ventures in appraisal services, insurance and mortgages.  We see the market from the "boots on the ground" level, and get enough industry material to also get the view from 10,000 feet above the ground.  I will try my best to balance those two perspectives, and hope that you will find this site useful.