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Biotech Takes Up Slack in County Office Market
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Business New Haven
10/15/2001
By: Anne-Marie Brungard
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The office market in New Haven County slowed during the first quarter of 2001. The region has reflected the national downturn and has witnessed closings or downsizings at several technology companies, including Lucent Technologies, DSL.net, Teligent and NorthPoint. The result is a year-to-date net absorption rate falling to negative 38,000 square feet and a vacancy
rate increasing slightly to 14 percent.
According to the “Mid-Year 2001 Market Beat Report” issued by Cushman & Wakefield, “The strength of the market lies in the first quality class A buildings, which saw vacancy tighten to 8.2 percent.”
Most of suburban New Haven County saw limited activity and flat vacancy rates during the first half of the year. The northern submarket (Meriden/Wallingford area) was the only exception, reporting healthy leasing activity.
The report notes that Verizon Wireless at Meriden's Research Parkway boosted activity rates with a large transaction. The 48,300-square-foot building, former headquarters of Yankee Gas, sold to Pacific Western & Investment for $3 million. This transaction, combined with other smaller firms, allowed the overall market to drop 6.4 percentage points to 6.5 percent at mid-year.
Cushman & Wakefield points to a healthy greater New Haven market in the biotechnology sector, viewed by many economists as somewhat immune to the current technology slowdown. According to a study published by Connecticut United for Research Excellence (CURE), spending in the state's biomedical sector grew by 15 percent last year, to $3.1 billion. This is more than double the amount of five years ago. The survey also projects anticipated growth and demand for new lab space to grow upwards of 70 percent by 2003.
This past year significant lease transactions have taken place involving Alexion Pharmaceuticals, Molecular Staging Inc., Achillion Pharmaceuticals and Cellular Genomics, which leased combined space of approximately 140,000 square feet.
Yale University's increasing openness in allowing researchers and faculty to participate in private research has positively impacted the market. With more than 1,000 jobs created, the area's nine biggest biotech companies brought the city of New Haven $1 billion in investment during the past year. In an effort to promote development of biotech space in the city, Gov. Rowland promised $30 million in state funds to aid laboratory construction and other downtown infrastructure improvements.
New Haven's Science Park is preparing to meet the need for first quality office and lab space. The 80-acre park is now under the management of Lyme Properties, which is undertaking significant renovations to the property. Phase I of the project includes the renovation and upgrade of the 260,000-square-foot Building 25. Renovations are scheduled for completion early next year. Fully rehabbed, Science Park will house more than two million square feet of mixed-use space.
Greater New Haven will continue to be viewed as a lower-cost alternative to Fairfield County. Average mid-year Class A rental rates in New Haven were $21.17 per square foot, compared to Fairfield's $37 per foot average. The report also indicates that New Haven may benefit from its “position as an ideal place for cutting-edge and emerging growth companies.” As a result, vacancy rates are expected to stay in the 14- to 15-percent range during the next year.
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