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Elm City Market Softens
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Business New Haven
8/20/2001
By: Priscilla Searles
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If you're looking for office space in New Haven's central business district (CBD), the good news is that it's a little easier than it was a year ago. According to Traub & Co.'s New Haven Market Wrap-Up, “Softer local market conditions can be attributed to the ongoing decline in the national economy, which is causing businesses to reconsider office space requirements.”
With a total inventory of just below three million square feet, the CBD's investory increased to 11.5 percent in the second quarter, up from 6.5 percent at the end of the fourth quarter of 2000. But the bad news for those seeking Class A office space is, according to Traub, “The Central Business District continues to be virtually out of Class A space, which will affect the market significantly once the economy regains momentum.”
Available space includes the former SNET headquarters at 227 Church Street, which remains vacant. Owners Elk Investors LLC, are still undecided whether to converted it to office space or residential use. According to Traub, if converted to Class A space, it would provide 156,000 square feet of space, which would absorb market demand over the next two to three years.
Class A office buildings in New Haven continue to average $24 on a gross basis (all operating expenses and real estate taxes included in the rent), and the only first-class alternative to 227 Church Street is Audubon Court at 55 Whitney Avenue. Traub reports that it is the only building with 25,000 square foot of contiguous space, located on the fourth and fifth floors of the building.
In spite of employee cutbacks, the most recent annual average data showed that there were 75,781 jobs in New Haven, up slightly from the previous year. According to Traub, the services and state government sectors drove most of the job gains, with transportation, communications, public utilities, retail trade and manufacturing industries losing a significant number of jobs over the year.
Neverthless, according to Traub, “most industry observers in Connecticut said they don't expect the state's technology and biotech sector to experience the same kind of carnage that the dot.com sector has.”
Lyme Properties is expected to start renovations to portions of New Haven's Science Park, while more lab space is scheduled to open in Branford and Cheshire. Another boost may come from the state legislature, which is considering a measure to increase the size of the state's $40 million lab-construction fund by at least another $40 million. Observers credit New Haven's close relationship with Yale for the technological expansion in the biotech industry in the area in and around New Haven.
Traub reports that the biotech industry is still expanding in and around New Haven. “New Haven stands to benefit from the millions in additional tax revenue [from new companies],” says Traub. “The city's take now is relatively small, because high-tech companies generally receive multiple tax incentives to come here. When those breaks expire - most incentives apply for five years - the city will receive about $2 million in new revenue. The works out to $7 per square foot of lab space. Office space generates about $4 per square foot in taxes; retail space [also] about $4.”
Most recently, Boston-based Winstanley Associates, owners of the 300 George Street Technology Center, are filling the former SNET space with biotech labs. Meanwhile, Lyme Properties, LLC has entered into an agreement to renovate and manage space at Newhallville's Science Park, also for high-tech use.
Plans for the future include Yale University's expansion of its high tech/biotech research facilities, the relocation of Long Wharf Theatre to a downtown location, a 120-unit housing development in downtown, high-speed Amtrak rail service to and from Boston and New York and the completion of design for a new downtown commuter station for Metro North rail commuters.
Another major project about to be launched is a $20 million 800- to 850-car parking garage to be erected in the financial district on the block surrounded by Elm, Church, Wall and Orange streets. According to the New Haven Parking Authority, construction will begin some time next year. The project involves primary appraisals for the property, some of which remains to be acquired while other parcels require easements before the project can go forward. There are ten property owners involved, although no buildings need to be razed.
The city is applying to the state for $4 million for land acquisition. According to William Kilpatrick, executive director of the Parking Authority, “The Parking Authority will issue a $20 million revenue bond that will fund the costs associated with construction. The garage should pay for itself, with revenues going for upkeep and maintenance. It should take approximately three years for the garage to be self sufficient.” Those projections, however, are based on filling 227 Church Street.
The Temple Street Garage will be available in October of this year and electric trolleys will circumnavigate a loop around town between parking lots. The trolleys are scheduled to be in service by the first of the year.
A major competitive advantage for New Haven is its lower rents compared to Fairfield County's higher costs and limited options. “New Haven's direct average rental rate (Class A, B & C buildings) of $17.93 per square foot remains well below the Fairfield region's average rent of $32.01 per square foot,” notes Traub.
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