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1999 Commercial Real Estate Market
A demand for suburban office space in New Haven County caused 1999 to close with tightening vacancy rates, healthy leasing and positive net absorption levels, reports Cushman & Wakefield.
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Business New Haven
4/17/2000
By:
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Leasing activity for 1999 totaled in excess of 720,000 square feet, dropping the overall vacancy rate to 16 percent at year's end, from 17 percent in 1998. New Haven County's high-quality Class A buildings closed the year with an overall vacancy of 9.5 percent, or approximately 362,000 square feet of available space. The western suburbs saw the biggest demand. Milford brought in Warnaco Inc., Wright Investor Services, Turner Construction and State Farm Insurance.
In New Haven's central business district, the 500,000 square feet of space that became available at 300 George Street purchased by the Winstanley Co. of Concord, Mass. was offset by two major leases when Yale University leased 50,000 square feet and the Pirelli Armstrong Tire Co. signed on for 39,000.
Others contributing to the annual net absorption of 165,000 square feet were William's Communications, DSL.net and the APT Foundation.
Cushman & Wakefield project that overall vacancy in the suburban markets should slowly tighten to 15 percent and rents should level off at approximately $17 per square foot by 2001.
The company further reports that the New Haven's central business district continues to lag behind the suburbs. The vacancy rate remained relatively flat at 17.5 percent, with the bulk of available space in older Class B buildings. New construction, among the first in a decade, is the 90,000-square-foot Class A building at the corner of Wall and Orange streets. Built by the Fusco Corp., the building is fully leased to the Federal Bureau of Investigation. In the works is a $2 million renovation of 55 Church Street, a 95,000-square-foot Class B facility.
In the industrial market, Cushman & Wakefield concludes that New Haven County continues to depend on its northern suburbs for strength and recovery. The firm reports 3.2 million square feet in lease and sale transactions recorded in 1999.
In Wallingford's Medway Industrial Park, a 200,000-square-foot building was completed last year and has been leased to SNET, Mills Pride, the Durham Manufacturing Co. and Harvard Manufacturing. In North Haven, Graebel Moving and Rittal Corp. leased 84,000 square feet and an additional 47,000 square feet, respectively, in the newly renovated and expanded 33 Stiles Lane.
Other significant deals included Watkins Truck Leasing, which occupied 77,000 square feet at 181 West Johnson Avenue in Cheshire, and Zoots Cleaners, which took 37,000 square feet at 22 North Plains Industrial Road in Wallingford, pushing the northern submarket's direct vacancy rate down by one percent from 1998 to 15.4 percent.
On the negative side, the closing of Pratt & Whitney's North Haven plant next year will have an impact on the northern market.
With little available for lease in high tech and warehouse facilities, new development is taking wing. A 45,000-square-foot facility was recently completed on Knotter Drive in Cheshire, partially occupied by Anixter Inc.
Regarding the future of the industrial market, a 70-acre parcel on Route 34 in West Haven was recently purchased for $2 million. In the works by the city of New Haven and the Regional Growth Partnership is a proposal to develop the former Sursam Corda site into a biotechnology campus. Other proposals for biotechnology facilities are under consideration in Orange, Hamden and Cheshire.
Connecticut apartment sales activity was down dramatically from the same period in 1998, according to Marcus & Millichap Witten & Nolletti's 1999 Annual Review of Multifamily Property Trades. But that's a bit misleading, according to the firm's Steve Witten, “because 1998 was an exceptionally strong year with the most trades that we have seen since the late '80s,” He says that “1999 simply experienced a lack of product flow, clearly not indicative of a lessening demand.” In addition, Witten points out that a number of transactions negotiated in 1999 did not actually close until January of this year.
A number of factors contribute to Marcus & Millichap Witten & Nolletti's prediction that the year 2000 will be a banner year. The firm cites a generally improved public image for multifamily housing and a increase in “in-fill” construction and redevelopment in urban areas. An increased demand for more luxury rental housing and lower cap rates on acquisitions should also help the market. The 1999 Annual Review of Multifamily Property Trades also point out an increase in property trades as a result of pro forma yield requirements as a likely contributing factor. BNH
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