Why Do Real Estate Professionals Care About State and Local Debt?

 It was recently announced that Connecticut has a debt load per taxpayer of $62,500, against an average across all states of $9300.  There are many ways to calculate debt, and to measure it versus average income, but this is a high number by any measure.  The reasons go back decades, most specifically to the 1980s, when Connecticut was flush with tax money, and many programs and benefits were instituted.  That, combined with the unusual strength of the public sectors unions in our state, left us with problems that still persist, and in some cases are getting worse.  The looming issue of State employee retirements, due to the benefit changes that begin in 2022, is leaving us, thanks to many exiting the workforce this year or next, with a much bigger roster of retired State employees, still entitled to the old package.

Why does this matter?  Ultimately, it affects property values.  The certainty of large future State expenses almost guarantees future tax increases.  Because we are not gaining population, as many other places are, the number we have to cover is not being spread over a larger group. This compounds itself as an issue, when those left to pay more decide to move out of state themselves.  For example, 37% of Connecticut's retired employees live outside of Connecticut.  So they don't pay taxes here, but get mailed checks every month.  So, to make up for that, we have put in very high estate taxes compared to other states, making older taxpayers move away even faster, since they don't want to die in Connecticut.  

This becomes a vicious cycle.  More people moving out means that taxpayers left owe more, which causes more people to move out.  You get the idea.  When fewer people stay or relocate into Connecticut, there are fewer buyers for property, making the market softer.  There are issues that go the other way, such as the fact that very little has been built over the past three decades, and that we have little land available for future construction.  COVID has actually helped us, given our open spaces and proximity to NYC and Boston.  That has caused shortages in housing and industrial real estate, for two examples, which is raising prices for those sectors.  

Within Connecticut, some cities and towns have their own debt loads that are high.  Hamden is a good example.  Taxes are higher on similar property than in surrounding towns, as Hamden struggles to reduce its debt.  Even though it is doing the right thing, there is pain for taxpayers in the solution.  It's easy to see how that scenario could play out on a statewide level.

What should you do?  Vote for fiscally responsible candidates.  Write to the ones already in office, and express your concern for added entitlements or givebacks.  Read the facts and take action as citizens.  And, above all, remember why you love living here, and work to preserve that, as well as promote Connecticut to others.  

Remember What Will Follow Apartments in Greater New Haven

 New Haven just keeps adding to its apartment inventory.  Some are retrofitted from other uses, some are built new, and all seem to be filling up.  Some of the short-term demand could be because more students are choosing to live off-campus during the pandemic.  Students from other countries, particularly, may be here even if there are no in-person classes, or if their cohort is not in residence at this time.  

Whatever the cause, we just seem to keep building.  Remember the old line from the movie Field of Dreams:  "Build it and they will come"?  Whether or not that is true, the real estate sequel, had it been made, would have reminded the characters that after they come, they will need other things.  Despite the tremendous growth in on-line shopping, there are necessities of life--and last-minute purchases--that require bricks and mortar stores and restaurants. So it stands to reason that, with new apartments everywhere--retail will follow.  

Smart investors should be looking now for what tenants want nearby, especially if they are students.  Gyms, spas, takeout places, and pet businesses are more popular than ever, but, even without bars and nightclubs, other establishments will do well.  Once the weather gets colder, bicycle commuters, walkers, and train riders will be picking up supplies on their way home from work, and they won't be going as far to do so. 

Even in these uncertain times, downtown New Haven is growing, and there is plenty of room for entrepreneurs to join the apartment dwellers.  And don't forget to think outside the box--our rich history as a manufacturing city has left us with plenty of interesting spaces, and they should all be considered.  Act now, and reap the rewards in the years to come!

Old Real Estate Maxim Still Rules

 When I was in business school, now decades(!) ago, I had a professor whose current work then was focused on how CEOs decide where to locate company headquarters.  His conclusion, after much research, was that the biggest factor in choosing a location was where the CEO him/herself wanted to live.  

While that isn't a shocking result, it is a little surprising that big organizations, with all kinds of considerations for transportation, labor force, infrastructure, taxes, and a myriad of other factors, would in the end have personal preference of one person as the greatest determinant.  We can see evidence of this still, in the recent behaviors of business executives during the pandemic.

Connecticut has been the beneficiary of a move out of New York City, and thousands of people have moved here in the past six months.  Yet we didn't expect that companies themselves would move, and that's turning out to be the case.  And that isn't just in the office arena--manufacturers and other seemingly less mobile property users are also in the mix.

We are getting showing requests and offers from buyers out of state, who are looking to locate where they plan to live.  There are many reasons for their choices, but it points to a brighter future for Connecticut than was predicted while tax policy and weather was causing a rush to warmer climates and distant vistas.  Now, the proximity to major metropolitan areas, combined with family dynamics, is helping us catch us with the economic progress made by other areas over the past two decades.

There are good reasons for this to continue.  Our location between Boston and NYC is obviously key.  Company owners and investors don't necessarily have to live here, but they will have employees and tenants who do.  Many family business owners also want to be where their children and grandchildren are, whether or not those generations are in the company or not.  The current focus on low density and outdoor space work in our favor, and our natural assets have become more important to real estate decisions.

Looking forward, we can see from the residential market that supply may become a limiting factor.  While none of us expected it, this uncertain age has become one of increased real estate activity, and a good time for sellers to consider putting properties on the market.  Who knew that the old research about company location would be so relevant now?

Pearce Commercial Agent Carl Russell Does Biggest SIOR Deal Nationwide in June

We can make big real estate news here in Greater New Haven!  Carl Russell, SIOR, CCIM, of Pearce Commercial, was featured in the most recent issue of the Society of Industrial and Office Realtors (SIOR) News. Carl sold 35,000 sf of medical office condominiums in Orange, CT.  The center is called Springbrook Commons, and it was the largest office sale reported nationally in the SIOR network for the month of June.

Carl also handled the sale of a large Family Dollar Store in the same month, showing not only his versatility, but the strength of the market across sectors.  While we have been focusing in this blog recently on warehouse and industrial properties, these two sales represented the retail and office portion of the current strong sales climate.

News sources reported last week that real estate was the only part of economy showing exceptional growth.  We all know that Connecticut is the beneficiary of New Yorkers seeking more residential space, but it's important to note that this extends to other types of space as well.  That broad performance suggests that there is somewhat general agreement that tangible property is a good investment, both for users and for investors.

This argues that we are in a seller's market, and that owners should consider listing now, even at a time of year that is normally slow (perhaps especially now, given the Northeast lull in COVID cases).  While we wouldn't have expected that our sales would boom in a pandemic, nor would we have chosen such a scenario, we are all surprised at the robust nature of the current climate for real estate.  Don't be left behind--this is your chance.

Residential Homes Statistics 2020 (Through 2nd Quarter)



IRS Extends Tax Deadlines

The IRS issued guidance Thursday evening to grant deadline relief for both 1031 like-kind exchanges and opportunity zone investments that are already underway.  Both of these programs are designed to promote economic growth in communities, and NAR made the case that investors in these programs should not be harmed due to the effects of COVID-19.
     

·        1031 Like-kind exchanges.  If an investor has taken the first step of a like-kind exchange by selling the old property, and either the 45-day or the 180-day deadline falls between April 1 and July 15, the deadline has been extended to July 15. 

·        Opportunity Zones.  If an investor who sold a capital asset planned to roll over the gain into an Opportunity Fund and the 180-day deadline to do so falls between April 1 and July 15, 2020, he or she can make the investment as late as July 15.  

Also, sole proprietors who pay quarterly estimated taxes now have until July 15 to file their second quarter payment.  As a result of an earlier IRS notice, first quarter estimated tax payments had already been extended to July 15.  This means that any individual or corporation that has a quarterly estimated tax payment due on or after April 1, 2020, and before July 15, 2020, can wait until July 15 to make that payment, without penalty.  

NAR has advocated heavily for these extensions since the outbreak of the COVID-19 pandemic. We'll have a full analysis of this announcement Friday on our dedicated coronavirus page.

Letter to Our Clients

Colleagues and Friends:

As many have said, these are extraordinary times. As you know, Connecticut Governor Ned Lamont has issued an Executive Order asking many businesses and organizations to suspend operations, while we battle the Coronavirus outbreak that has disrupted our health and our lives.

As of now, real estate services are exempt from the order to close due to the fact that for some people, moving may be a necessity even in this stressful environment. Some businesses critically need more space to provide for increased demand in certain industries. There are many in our community right now who are in the middle of a real estate transaction, or who find themselves needing to purchase or sell a property due to changes in their jobs or their families.

While we remain available to those who need us during this time, the Governor's order was put in place for a reason, and we are doing everything we can to respect and honor it. That means that at Pearce Real Estate, our primary concern is for the health, safety, and welfare of everyone in our community that is affected, in whatever way, by the current crisis. So, while we are still able to serve you, we will be strongly recommending doing so virtually. When in-person contact is required, we will be sure to do so safely and appropriately to respect the circumstances.

During this time, we feel one of our primary responsibilities is to listen; whether it's about a specific housing need you may have, or just about how this situation is affecting you and your family. Even if you’re not someone who needs to move right now, you may have questions. Please know that we are here to help you make the best possible decisions for your specific situation and help you safely through the process.

We will continue to communicate information we believe to be important to you as circumstances evolve. In the meantime, don't hesitate to contact us.

Thank you for the trust you have placed in us, and we intend to do everything we can to live up to it.

Together we'll get through this.

Barbara L. Pearce

CEO & Chair
Pearce Real Estate

Investment Real Estate Still Strong

For all of the complaints of businesspeople about Connecticut, it remains a place in which people want to invest.  There are many reasons for this.  One is that most investors tend to invest close to home, maybe because it's easier to take care of details when the property is close by, and maybe because they know more about values in their own vicinity.

Another reason is that there are specific opportunities in our region.  For example, New Haven has a robust rental housing market, with thousands of students, and a population that includes 62% renters.  Despite all the building, conversion, and development of rental housing over the past decade, inventory keeps disappearing. Much the same is true of warehouse space, based upon our proximity to Boston and NYC.

Prices remain low in our area, especially, again, compared with our neighboring states.  Although prices for residential property rose 7% in January, over the January before, there are still bargains to be had.

We have a strong vacation home market.  Waterside and wooded locations appeal to buyers, because they can be enjoyed, but they can also be rented to others.  Fears about travel will only increase the desirability of locations near major metropolitan areas.

There's a lot of money in Connecticut, and it all needs to find places to go.  Real estate is an attractive opportunity, and one that most people understand and appreciate.

All of this goes to suggest that, if you have property to sell,  you should consider selling it now.  If you are looking to buy, you should do that before the inventory dries up.  Based upon the above list, that might not take too long.

From the New Haven Register By Dan Haar : Connecticut’s lost decade — and how to avoid a repeat

By Dan Haar, New Haven Register, click to read online

 

 

 

Think back to the first week of 2010.

 

The reigning champion UConn women’s basketball team was steaming toward five more rings in the next seven years. A former Stamford mayor who lost the Democratic primary for governor four years earlier was about to win the seat and hold it for most of the decade.

 

Obamacare was adopted but not yet in place. The Sandy Hook tragedy was three years away. And the Great Recession had hammered Connecticut along with the rest of the nation.

 

As the decade opened, Wall Street had started back upward but Main Street still reeled at rock bottom, facing a tough slog. Exactly ten years later, the nation has recovered heartily and then some, under two presidents.

 

Connecticut? A lost decade by just about every economic measure.

 

A lost decade — and worst of all, we’re not in the clear yet. One more decade like the one that just ended and we are basically western New York, a place with some great assets that’s on the way to someplace else, looking to recapture its old glory.

 

The hopeful news is, we can still avoid another 10-year meltdown. We need some demographic breaks, a solid dose of attitude changes and an embrace of the elusive political middle.

 

Let’s look at the numbers first.

 

A lost chunk of the state

 

Connecticut’s jobs count, the most important measure of how we’re doing, grew by 4 percent in the decade, a total of 66,000 positions if we count annual averages including preliminary 2019 totals through November. By contrast, Massachusetts and the United States both added 15 percent.

 

Those are just numbers. Consider what it really means. If Connecticut had gained jobs at the same rate as the nation, we would have added another 179,000 — enough to support as many households as there are in New Haven, Hartford, Fairfield and Greenwich combined.

 

 

It’s as if we lopped off a hefty chunk of the state, heavily populated by young college graduates. And the housing market reflects that haircut.

 

When the decade started, a single-family house at the median among all sales — where half sold for more and half less — stood at $242,000, in shooting range of the Massachusetts median of $285,000, according to The Warren Group, which tracks house sales. As of 2019, Connecticut was up just 8 percent to $261,000.

 

In Massachusetts, that median house in 2019 fetched an even $400,000 — a 40 percent jump. And although there are no official figures for national median prices, one fastidious website calculates the U.S. gain at 44 percent for the decade.

 

 

What does that mean for the typical Connecticut homeowner? If you owned a house that was worth $350,000 in Connecticut a decade ago, you missed out on $112,000 of price gains that people in Massachusetts and most other states realized in just those ten years. Some parts of Connecticut, notably Fairfield County, fared even worse.

 

Shrinking in an expansion

 

If you’re counting income, we’re still the richest state in average income per person and we’re in the top ten in how much typical families earn. But we’re slipping there, too. That’s harder to measure because the reported numbers bounce around due to small Census sample sizes.

 

We do know this: The biggest picture of all — the total value of goods and services produced — shows Connecticut’s lost decade at its starkest. The total product for Connecticut actually shrank by 0.5 percent, adjusted for inflation, when we compare the average for all of 2009 with the average for the 12 months ending last June, the latest data we hav

 

That’s a shrinking economy after the U.S. recession ended, friends. One slice that meant thousands of livelihoods — the manufacturing of non-durable goods such as food, pharmaceuticals and household items — slipped by almost half, to $6.9 billion a year. The much larger, higher paying finance and insurance sector cratered by 23 percent.

 

Massachusetts, ignited by the allure of Boston and explosive gains in bio-sciences, shot ahead by 20 percent overall even as we shrank. And the nation as a whole, which grew slower than Connecticut from 2005 to the end of 2009, expanded by 19 percent in the decade that just ended.

 

What Connecticut doesn’t have is an unemployment problem, as we track the nation in jobless rates. That’s partly because we don’t have vast tracts of poverty, another strength of Connecticut. And it’s partly that many people just leave if they’re out of work or under-employed. The Census numbers show an average of 24,000 people a year moving to other states over the last five years, making Connecticut the 4th worst in the continental United States, ahead of only Illinois, New York and New Jersey.

 

 

 

 

I’ve studied Connecticut prosperity full-time for four months shy of 25 years as an economics reporter, columnist and business editor. I knew these numbers intellectually. Seeing them all together, calculating them as a decade in the mirror, I feel a punch in the gut, a wistful tear for lost opportunity as a transplanted Connecticut homeowner by choice, an employee in a struggling industry and the father of a newly minted teacher in Boston who’s not coming back.

 

What happened?

 

We’ve argued the causes of Connecticut’s relentless recession from the very start. Tax increases, driven by decades-old debts and obligations, piled up even as former Gov. Dannel P. Malloy cut the size of government by eliminating more than 5,000 state jobs.

 

We’re in the hole by as much as $100 billion including pensions and future health care for public employees, despite restructuring the debts and benefits multiple times. The problem isn’t today’s benefits, though they’re too high for older state employees. It’s that for decades, Democrats and Republicans alike failed to set aside money.

 

Costs for utilities, education, entertainment and health care have climbed as they have in the rest of coastal America. But the perceived value of living in Connecticut didn’t keep pace in large part because we lacked, and still lack, a true magnet city with enough critical mass to attract millennial college graduates.

 

Leafy suburbs unconnected to major cities fell out of favor and the center-cities Connecticut does have are not able to compete with second-tier metros such as Minneapolis, Dallas and Pittsburgh, let alone the giants.

 

 

Manufacturers slowly moved operations to cheaper places. Corporate headquarters, facing profit pressures, retrenched. A few big events bled thousands of jobs, chiefly rising competition for the native American casinos and consolidation in financial services — especially the breakup of General Electric’s GE Capital. That breakup cost 2,700 lucrative jobs, nine times more than the more widely cited but less important exit of GE’s headquarters from Fairfield to Boston in 2016.

 

The Trump-led tax reform of late 2017 didn’t help. Although high-income earners have seen a nice break, the new limit of $10,000 on federal income tax deductions for state and local taxes hurts the entire Northeast, costing Connecticut residents an estimated $2 billion a year.

 

What we have, in short, is a vicious cycle in which people leave or stay away because costs are high in comparison to perceived value, or they leave or stay away because we don’t have any large cities in Connecticut. And that of course drives up costs further because it lowers the tax base. Warren Buffett, the multi-billionaire corporate investor, didn’t help matters by warning people to avoid states with high unfunded liabilities.

 

Rena Carreiro was among those who felt herself moving sideways during the decade. She had worked as an office manager for a manufacturer since 1993. Over the last ten years the business retrenched in Connecticut, moving work elsewhere.

 

Carreiro performed finance, human resources, production control and inventory tasks, taking on more work as people left. “It was wonderful to learn all those new things,” the Waterbury resident said.

 

But there were few opportunities for career advancement. The company — which Carreiro didn’t want to name — closed her plant at the end of 2019. She landed a job at Parker Medical in Bridgewater, a growing company where she has high hopes and new optimism.

 

Solutions

 

Like Rena Carreiro, we as a state can take measures to avoid another lost economic decade. Here’s a 6-point plan:

 

  TAKE A MIDDLE PATH ON POLICY— Democrats and Republicans need to meet in the middle. That means Republicans need to tone down the two-note chorus about taxes and state employee benefits, and help govern like they did briefly in 2017, when the Senate was split 18-18. And it means Democrats must pull back on the throttle for great programs we can’t afford. It’s no coincidence that Massachusetts does well with Republican governors and Democratic legislatures, and the nation does well under centrist presidents such as Bill Clinton. The middle path means Republicans need to stop trashing the unions and Democrats need to stop protecting every iota of their benefits. Modest givebacks on retiree health co-payments and cost-of-living adjustments won’t kill anyone and will help the state. And the middle path means pushing hard for efficiency gains in government at the state and especially in cities and towns, where property taxes are way too high.

 

  SHOW SOME CONNECTICUT PRIDE — Yeah, that was the name of a basketball team but it’s hard to find a place that trashes itself as much as we do in this state. Knock it off. You know who you are. Connecticut has great education, access to mountains, oceans and countryside and a lot of smart and innovative people. We have good cities, not great ones, with truly notable food and music, and access — there’s that word again — to two of the greatest cities in the world. Lack of growth has left us more open space and less sprawl. Enjoy it. Get psyched. Work hard, play hard and stop feeding the collective depression. It’s a small state, go make something happen.

 

  EMBRACE RISK — What do finance, insurance and defense manufacturing have in common? They’re all built around controlling risk. That’s what we do and it shows in the personality of the state. When it comes to business, we need the culture of put-it-out-there enterprise that seems to make no sense, like Amazon, Facebook, Tesla and Microsoft at their founding. We had it in the 19th and early 20th centuries and lost it.

 

  MARKET TO IMMIGRANTS AND YOUNG PARENTS - That’s our sweet spot because it’s more about education and family than urban lifestyle. Connecticut does welcome immigrants in contrast to Trump’s America and that can help us. We do have a good record of attracting people in their 30s. We need to reach those groups more actively with targeted campaigns.

 

  KEEP WORKING ON CITIES AND TRANSPORTATION - Connecticut will never compete on price with North Dakota and Mississippi, nor should we try. Building the place up matters even though it costs money. It’s working in Stamford.

 

  LET EQUILIBRIUM HAPPEN -- State Sen. Matt Lesser, D-Middletown, thinks it’s fine that houses are not overvalued. More opportunity for buyers, he says. It’s a matter of balance and equilibrium. At some point, millennial professionals might figure out that living in a great house in Milford or New Haven’s East Rock neighborhood, with a 15-minute commute, beats five to an apartment in Brooklyn and two hours a day on the subway. That may mean house prices have to fall even further, which sucks for us homeowners. But it’s a path that will work. Embracing equilibrium means understanding that bike lanes in and out of cities, and saving historic landmarks such as the Sanborn Library in Bridgeport, which was tragically demolished in August, will add up.

 

The cul-de-sac

 

Following a balanced path leaves plenty of room for debate over whether we more urgently need to cut taxes — the Republican solution — or, as Democrats insist, increase value by adding amenities to make the state more hospitable.

 

The same argument unfolds issue by issue: paid family and medical leave, a $15 minimum wage, housing subsidies for the poor, housing subsidies for the rich (yeah, apartments in Hartford at a cost of tens of millions for state taxpayers), corporate handouts, expanded Medicaid and on and on. In each one, there is a middle path of compromise that get too little attention. Paid family and medical leave, for example, is too rich a program, too soon, although it’s worthy.

 

All the while, we lost a decade.

 

Twenty-one years ago, a regional economic report warned that Connecticut was in danger of becoming a “cul-de-sac,” an economic dead-end, in part because it lacked “dynamism” in the coming century of urbanization and globalization. Hmmm.

 

“Right now investment is bypassing the state and we have become in many respects that cul-de-sac,” said Donald Klepper-Smith, a longtime economist who has, as of 2020, entered semi-retirement and moved to Massachusetts and South Carolina.

 

Klepper-Smith’s view: We need leadership and strategy to achieve fiscal discipline. “I don’t think it gets fixed in my lifetime because I don’t think we have the political will to fix it,” he said.

 

I’m more optimistic but only slightly. But there are many fronts in this war. Clearly, after the lost decade Connecticut just endured, there is no more wiggle room.

 

Rich Dupont, a manufacturing consultant, is helping the community college system, especially at Housatonic in Bridgeport, train machinists for the thousands of open jobs in advanced manufacturing that will disappear if qualified people don’t materialize. What he says about that battle also applies to the entire state economy.

 

“We are teetering on the edge.”

 

What Will 2020 Bring?

Predictions are always dangerous, and our region, in particular, is often out of sync with other parts of the country, but certain trends seem like fairly safe bets to continue.  One obvious one is the predominance of millennials in the real estate marketplace.  They continue to do things on their own time schedule--they marry later than we did, have children later than we did, and buy houses later than we did.  They also seem free of the stigma of renting, and often prefer to spend their money in other ways.  This makes sense in areas where appreciation has been low, and where it can take a long time to sell something, since they tend to move a lot.  One surprising factoid is that they do buy in the suburbs once they have kids, which many experts thought they wouldn't do.  They do, however, prefer smaller homes on smaller lots, with sidewalks and in walkable neighborhoods.  They also like gray color schemes and soapstone counters, to the boomer off-whites and granite.

The lack of rental stigma carries over into investment real estate.  Younger investors seem to like multifamilies and even single houses for rent, as opposed to the strip centers and office buildings of the boomer generation's investments.  This market continues to be active, especially in light of the many predictors that would indicate a future decline in stock prices.  Bigger investors are also still keen on rental properties, including larger developments.  Warehouses, in addition, are in demand, thanks to online shopping and its concomitant need for shipping locations.

Connecticut is mixed in appreciation growth and in strength of the market in general.  Some places in Fairfield County are popular, while others are not.  New Haven is the epicenter of demand for residential property.  Shorter (and sometimes non-car) commutes and the factors listed above both contribute to that result.  We will have to wait and see what effect tolls have on individual towns and cities, if they ever come to pass. The State's "debt diet" may also come into play, as municipalities lose State financing for improvements and amenities, and local taxes rise.

In conclusion, we are pretty bullish on 2020.  We don't have excess supply in most categories, our distances are small compared to many parts of the country, and cities are thriving in many places.  If Connecticut can manage to raise the rate of job growth, which is close to zero, real estate will only get better as an investment.  We look forward to a year where that can occur!

Dear Santa--A Realtor's List

Dear Santa,

We know that the following list is not the kind that you can just deliver to us.  We're hoping, however, that some of the magic of Christmas will make our wishes come true!  Here's what we'd like:

1. Please help our clients understand that required paperwork is not mandated by us, and that we are the ones who get in trouble if it isn't signed in a timely way;
2.  Please remind our clients that only get paid when a transaction occurs, so that they should realize how important it is for us to be compensated fairly when that happens;
3.  We wish that everyone knew what things are within our job description--and there are a lot of them--and what is not, so that people would be reasonable about what they are asking us to do;
4.  Please don't shoot the messenger--we only tell clients what the market is doing, not what we think it should be, and higher prices help us also;
5.  We would love to be treated like the professionals most of us are, and in the same category as lawyers, bankers, and accountants;
6.  Understand that we get into trouble mostly when we try to do something that isn't within our field, so remember that we are the agents, not the principals;
7.  Help us meet all of the deadlines, and keep the communication lines open;
8.  Please respect our time, especially since we are providing it regardless of whether we are compensated later for it;
9.  Especially at this time of year, remind everyone that we have families and obligations also; and
10. Please, Santa, make 2020 a wonderful year for Connecticut real estate!

We wish Happy Holidays to all of our clients and friends, and best wishes for a wonderful New Year, and thank them for all of their business.  And Santa, thanks for reading our list!

From all of the Realtors at Pearce Real Estate

Don't Write Off December

Although the year is drawing to a close, the real estate season isn't over.  Many people figure that holidays and vacations mean that nothing to do with property will get done, but that isn't always so.  In fact, because the end of the year is a hard deadline for some projects, professionals often rush to make sure that transactions are completed in time.  Delays are made up for by planning for them.  And lots of people in the industry wait until January to take a break.

Even clients can be easier to reach.  Especially this year, when Thanksgiving was so late, the season is rushing toward us, and business travel slows down.  Weather keeps some from traveling, or even from regular appointments.  When businesspeople are in the office, they sometimes have less punishing schedules.  Things they need to get done can depend on others, who are not around. Financial chores and future planning take place onsite, in many cases, as do reviews and strategic sessions. Even shopping is now online for lots of gift givers. As a result of all this, it can be more possible to reach people at their desks, not less.  And they may be more likely to answer their own phones, due to clerical absences!

What does this mean for buyers and sellers?  Push to get things done, even in the last weeks of the  year.  Try a little harder to find common ground--expect that there may be more flexibility when time is short.  Put off that shopping list, and get down to business.  You'll be glad you did!

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?

Embrace the College Towns of Connecticut

We are fortunate to have places in Connecticut where universities drive the economy.  While Storrs was a farming community, New Haven and Hartford had industry.  As that industry leaves or automates, we can be glad that students followed.  College towns have a vibe all their own, and we should enhance it, not fight it.

Students look for a different type of retail, as well as later hours and trendier choices.  They also seek alternative housing in many cases, and have income from parents, in many cases, which extends their buying power.  We have learned in New Haven that high-end housing is affordable to many graduate students, in particular, and that those units are snapped up far more quickly than we all expected.

The same dynamics should apply to retail.  Disposable income is spent differently by demographic profile,and younger people tend to use more discretionary services. They learned from us that time is money, but they act accordingly, while we don't always do that.  Places that specialize helping others live more graciously, healthfully, or pleasantly are key to this movement, and should inform our investing and developing choices.  And the rest of us can benefit from those offerings, so we all win!

Tax Effects Uncertain

Pundits spent a lot of time last year, trying to predict what buyers would do in light of the many tax law changes.  People in Connecticut were especially nervous, given our status as a state where changes in the treatment of SALT (state and local taxes) would have a big effect.  Here we are, a whole tax year later, and it's hard to say for sure what happened.  In my own case, many different laws were applied or eliminated, and my total taxes in the end were so close to what we paid last year that I questioned whether we could have signed last year's return again.

On the residential side, where we really thought capping SALT deductions would cause high-end prices to fall, the opposite seems to be happening.  Properties along the coastline especially are flying off the market as quickly as they come on.  Perhaps it's supply, which has declined, perhaps it's the increasing number of years since the last big hurricane, or perhaps people are generally doing well, despite what they may tell pollsters who call them.

Anyway, if you've been thinking that there are no buyers for your properties, think again.  They are out there, and they are buying.

My Sabbatical

I am perhaps one of the unusual people who has stayed in the same job for most of my adult life.  I have been running Pearce Real Estate since the mid-1980s, after leaving the practice of law to work with my father in late 1981.  Although it's challenging and absorbing, and I love the people with whom I work, this seemed like the right time for me to take on a new challenge for a little while.

Connecticut Hospice has been a part of my life since childhood, when my father was on the Board and his best friend was the Board Chair.  Over the years, we have represented them in real estate transactions, including the move into their current location.  Pearce Real Estate has done a Day of Caring there, after Hurricane Irene, which was shortly after my father died there.  I have always known what a special place it is.  When I was recently asked to help them, after a period of turbulent management change, I didn't hesitate.  I agreed to become the interim CEO, and I started almost immediately, a few weeks ago.

It has been the most intense professional experience of my life.  There is so much to do, and I am also trying to master a new field.  However, I have great people working with me, and CH has extraordinary employees, who believe passionately, as I do, in the mission of Connecticut Hospice.  They have supported me every step of the way, and thanked me for coming to work every morning.  What happens in that building, and in all the places where CH delivers home care, is a labor of love for every staff member.  I am privileged to have been asked to lead such an amazing organization.

I am also blessed with a terrific team at Pearce Real Estate, where everyone clapped, or even cried with joy, when I said that I was going to spend the next year at Connecticut Hospice, They, too, are extraordinary people, and always in my heart while I work to make Hospice thrive.  I am proud of the work they do as well, and the professionalism with which they assist clients with all types of real estate needs.  Nanette Pastore, who is running Pearce in my absence, is the best partner any executive could ever want--talented, hardworking, caring, and committed.  She is more than ready for this challenge, and she deserves all the support she is getting from everyone.

This blog will continue, as well my commitment to Pearce Real Estate, although most of my time is fully taken at the moment!  I look forward to continuing the dialogue about issues in buying and selling, and to your ongoing readership.

A State Full of Warehouses

There's been a lot of talk about the aborted Amazon deal in Queens, and many commentaries on the pros and cons of the decision.  Let's not lose sight of the fact that we have a big--gigantic, even--warehouse going up in North Haven.  Although distribution centers lack the glamour of headquarters buildings, and admittedly have many fewer employees per square foot, they certainly boost the local economy in many ways.

Connecticut, with its prime location between Boston and New York, has long been a place from which companies served both of those markets.  Even as the world becomes more technological, and much more things are done online and in the cloud, there are still more and more physical objects that get moved around daily.  Many more shoppers go online to buy, as opposed to driving to a traditional mall.  Streets are littered with FedEx and UPS trucks, and 54 cents of every advertising dollar is now spent online.

That should mean that our future in this state will depend upon our ability to help manufacturers and middlemen move goods from place to place, especially in the Northeast Corridor.  We are well suited for that, as long as we begin to focus more on our infrastructure.  The transportation lockbox in Hartford will be key for improving our roads and rails.  But geography, and our much lower real estate prices, are on our side.

Properties that are built as warehouses, distribution spaces, or flex spaces, and those that can be rehabbed into those types, are ripe for the picking.

CoStar Reports

All of our commercial agents are busily learning the latest features of CoStar, with intensive training from both inside and outside the Company.  How does this help you?  We have lots of big data and specific facts about properties in Connecticut, that you can request to help you evaluate choices, locations, your current space, and more.  Although clients these days can find information all over the internet by searching themselves, they rarely have access to the complete inventory in a given area.  And, if they aren't regular searchers, they may not know everything that's possible to download or format.

So give us a call.  Tell us what you're looking to learn, and we have a program for that!  Information is power, and we're feeling very powerful these days.  Let us put that knowledge to work for you.