Incubator Space

New Haven, with its entertainment, restaurants, college scene, and new rental properties, has become a haven for start-up companies.  Often such companies look for cheap space (compare us to NYC!), cheap labor (all those recent college graduates!), an educated workforce, a fun place to live, and access to universities and their research facilities.  New Haven scores highly on all those variables.

It makes sense that entrepreneurship would be booming now, because it's hard to get a job working for someone else, especially in Connecticut, which is last in the country for jobs recovered from the recent recession (now at 48%).  More often than you might think, a poor job market leads people to start their own businesses.  Those businesses are almost always short of cash, and therefore can't pay premium rents.  Of course, they also fail more often than established enterprises.

On the other hand, they can grow rapidly, and end up expanding into additional space.  They may also migrate from one property to another, belonging to the same developer or investor.  Also, they usually don't require the kind of fit-up that bigger companies do, and may even find unfinished space funkier.  Layouts in start-ups can be freer, with open work areas without private offices common.  So, even if a landlord is taking one kind of risk, he or she could be saving in another expense category.

Think of it the way you might think of buying penny stocks.  You might lose a little money, but the upside potential is almost unlimited!

New FEMA maps for Connecticut

One of the legacies of Hurricanes Sandy and Irene is a new focus on potential exposure for future storms.  FEMA has issued new maps this year for Connecticut, changing the classifications of some areas from one category of risk to another.  In some cases, this can translate into large increases in flood insurance premiums, or even new requirements for flood insurance where none existed before.

In past years, the government has phased in the increases in flood insurance premiums, as jumps in the costs to owners can be large, and hard to handle all at once.  Given the costs of the last two storms, it seems unlikely that further phase-ins will be used.  Therefore, it's very important that owners and potential owners consider carefully the costs of flood insurance when calculating the costs of property ownership.  Remember that rivers also flood, and that commercial properties not near the coast (such as the office building in North Haven that I'm sitting in right now) can also have water problems with storm surges.

Also, buyers should take note of the fact that it can be harder to insure some flood-prone properties, and should not wait until just before a closing to look for insurance.  It may not take as long as environmental tests or financing applications, but insurance is no longer a call on the way to the closing table. It's just another fact of real estate life today!