|
|
|
A Tale of Two Markets
In downtown commercial R.E., the story remains too much 'B', not enough 'A'
|
Business New Haven
2/17/2003
By: Mitchell Young
|
Traub & Co., a New Haven-based commercial real estate firm, has released its "New Haven Office Market Report" for year-end 2002.
The report has both good news and bad news for those with a financial interest in the New Haven office market.
The Elm City last year managed to sidestep the swelling vacancy rates occurring of some other New England markets, notably Boston. Nevertheless, according to the Traub report, "The New Haven office market ended the fourth quarter of 2002 in about the same state as it finished each of the previous three quarters: stagnant."
Companies with office leases coming up for renewal last year found themselves in a favorable competitive position, according to Traub. "Many renewed leases in their existing buildings at lower rents. Landlords generally did whatever was necessary to keep their tenant rosters intact."
Specifically, the Traub report noted: "The New Haven central business district (CBD) saw several small leases signed in Class A and B space. The result is a 5.4-percent Class A vacancy rate that includes 40,000 square feet of sublease space."
A large chunk of that sublease space is in the Connecticut Financial Center at 157 Church Street, where the United Illuminating Co., among other tenants, is downsizing its real-estate needs. Some other Class A buildings in the CBD include the New Haven Savings Building at 195 Church Street, One Century Tower at the intersection of Whitney and Grove streets and the so-called Gold Building at 234 Church Street.
How one views the relatively low vacancy factor for Class A space depends on your perspective, according to Traub. "A low vacancy factor is an indicator that the market is healthy," the report notes. "On the other hand, such a limited inventory restricts tenants' options and entails the risk that growing companies will be forced to leave the area."
That equation will be altered shortly with the opening of One Audubon, a 60,000-square-foot office building at the corner of Audubon and State streets scheduled to be ready for occupancy in June. The building, being developed by former Starter Sportswear Chairman David Beckerman's Acorn Development Group, is the first new downtown building to go up in New Haven in more than a decade.
"This additional square footage will increase vacancy to just below ten percent - a much healthier market condition for companies looking for space," notes Traub.
Represents an investment in excess of $50 million by the Winstanley Corp., the 300 George Street Technology Center is nevertheless not considered a Class A building in the Traub Rrport.
The building is being developed primarily for bioscience tenants. The 500,000-square-foot former SNET operations building is about 50-percent occupied. The past year has seen the expansion of Achillion Pharmaceuticals as well as the location of several biotech firms including Rib-X Pharmaceuticals. The Pirelli Tire Co., an office tenant, chose to leave the building - and the city.
New Haven's ample supply of Class B buildings does not currently fare as well, according to the Traub report. Buildings such as 59 Elm Street, 55 Church Street and the 900 Chapel Street office tower all compete in the Class B market.
"There is about 200,000 square feet of vacant Class B office space in the CBD," Traub says. "Much of this space will require major renovations before it can attract tenants."
Non-CBD New Haven
Problems for Class B space are much worse in the rest of the city than in downtown, according to the report. "The market outside the CBD in New Haven contains approximately 1.5 million square feet, of which 46 percent is Class A space (555 and 545 Long Wharf Drive are two Class A buildings included in this equation).
"There is a drastic dichotomy in the availability rates for Class A and B space in this submarket: virtually all the Class A space is occupied, [while] almost one-third of the Class B space is vacant."
Forecast for 2003
Surprisingly, Traub argues that this may be an ideal time for landlords of Class B space to find opportunity.
"The New Haven office market is fundamentally out of balance due to the very low vacancy in the Class A market and the profusion of Class B space," says the report. "Much of the B space is hard for companies to use due to problems in the buildings, including various degrees of obsolescence.
"If the economy improves in 2003 as forecast, companies may find their choices of functional space limited. This is an excellent time for landlords of Class B buildings to take a hard look at their properties to ensure that they will in fact meet the needs of today's business when demand strengthens in the marketplace."
|
Go FirstGo PreviousGo
NextGo LastGo
to Index
|
|
