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!

Office Space Update

CoStar, our national research tool, has found that the rebound in large company profits and sales is beginning to  expand to smaller employers.  Nationally, office space use is creeping up, and vacancy rates--already low due to lack of construction in recent years--are low.  This is in marked contrast to what we have been seeing in the past couple of years.  In our region, we have been noticing a bigger number of startups, maybe a natural  result of people being laid off from their jobs, but also a sign of confidence in the future of industry here.

If you are a tenant, now is the time to renew, expand, or lengthen your lease, before concessions disappear and landlords look to recover some of what they've given back recently.  If you are a landlord, good news appears to be around the corner.  And not a moment too soon for us!

Users are Out There

We have been happily surprised this season by the interest in listed properties by users.  During the darkest days of the recession, most people who were looking at properties were investors, usually what we call "bottom fishers"--people looking to get a really good deal from the misfortunes of others.  This is especially true when they have cash and can close immediately.

While we expected the early spring market to be more of the same, we are finding that showings are more often for businesses and organizations that need space.  There are a lot of start-ups, and also places that need to expand.  This is an excellent sign for the improvement of the commercial real estate market, and one that we hope to see continued in the weeks and months to come!