A mixed development bag, but hope springs eternal for 2010
The economic downturn put a not-unexpected damper on the greater New Haven commercial real estate market during 2009.
Certain sectors suffered more than others as companies cut costs and personnel.
New Haven office vacancy rates reached record lows, while retail receded and industrial and manufacturing remained flat.
Investment activity crawled and some development projects stalled due to financing and market uncertainties.
But signs of progress were unmistakable. Yale-New Haven Hospital’s long-planned Smilow Cancer Hospital opened, to much fanfare.
Becker & Becker’s 360 State Street multi-use development rapidly grew skyward.
Winstanley Enterprises renovated the old Winchester gun factory building in Science Park and announced plans for a new office and laboratory building in downtown New Haven.
In September, Federal Reserve Chairman Ben Bernanke announced that the recession was over, and as the year drew to a close, area brokers were optimistic about 2010, predicting commercial activity would rise along with economic recovery.
Here’s a closer look at some of the highlights of the year.
DOWNTOWN DEVELOPMENTS
Smilow Cancer Hospital
The 14-story, $467 million, 497,000-square-foot structure opened in October, after nearly six years in the planning, financing and approval process. Smilow’s insides include a dozen operating rooms, medical oncology units, 168 in-patient beds, a breast cancer center and a seventh-floor outdoor “healing garden.”
In November, two retailers signed subleases at a related development project (see related story, page 22), a six-story structure at 2 Howe Street containing 13,000 square feet of retail, 40,000 square feet of office space, a 845-space parking garage and two dozen housing units for cancer patients and their families.
Yale-New Haven Hospital is leasing the complex, which is scheduled for completion in January by the Intercontinental Real Estate Corp.
360 State Street
The steel was scheduled to be topped out the first week of December, and the 32-story building is “on track” for a Leadership in Energy & Environmental Design (LEED) gold or platinum designation, according to developer Becker + Becker President Bruce Becker.
“Everything is a little ahead of schedule,” Becker reports. The developer reports that he is pleased with recent state environmental legislation, which he championed, establishing $25 million in tax credits for those who construct energy-efficient buildings.
“Looking back on the year, it was a victory to get the tax credit passed, which will help cover some of the cost for our green building improvements and also help pay for the cost of our fuel cell.”
The 360 State Street leasing office is being readied to open next month, Becker says, and most apartments should be finished in summer 2010, with “people moving into them in September and October.”
Becker remains tight-lipped about the identity of the “full service grocery store” in negotiations to lease the entire 30,000 square feet of retail space along Chapel Street. In late November, the deal wasn’t done.
Gateway Community College 
The long-awaited groundbreaking is expected by the end of January, according to Gateway spokesperson Evelyn Gard,
In late November Dimeo Construction was working on the foundation for the new downtown New Haven campus on the site of the former Macy’s and Malley’s department stores, which will united GCC’s two current campuses on Sargent Drive and in North Haven. The construction timetable sets spring 2010 for completion of the four-story, 360,000-square-foot building, which is to open in fall 2012.
On November 2, the state bonding commission approved $182,730,057 in funding for the new campus.
Former Veterans Memorial Coliseum Site
Northland Investment Corp.’s “Tenth Square” plans for mixed-use development on the 4.5-acre parcel could be divided into phases, according to city Economic Development director Kelly Murphy.
Asked about the project, Northland spokesperson Mary Coursey reports in an e-mail: “Despite the current economic climate, our commitment to New Haven and to developing the Coliseum site has not wavered.
“The Coliseum site deal is very complicated — there are many moving parts as a mixed-use development with an affordable housing component as well as the theatre component,” according to Coursey. “With the continued support of the city’s economic-development team, which has a very pro-business, can-do attitude, we feel very confident that the Tenth Square project will be a major keystone for all of New Haven.”
205 Church Street
Hampshire Hotels & Resorts, LLC, rehabilitated the former Union Trust building during 2009 but hasn’t yet decided what to do with it.
In May, company spokesperson Brendan McNamara, told BNH the plan was to create an upscale hotel within three years.
In late November Kevin Lillis, Hampshire’s vice president of real estate development, said the company was evaluating various options. “We haven’t even decided if things are going the hotel route. We’re getting toward the end of stage one, which is bringing the building back toward what it was.”
The upgrade included replacing brick and windows, restoring the tower with new gold leaf, installing exterior LED lighting and cleaning up space occupied by tenants leaving in 2009. Wachovia is the sole remaining tenant.
“Right now the project is fine,” Lillis said. “Before [the renovation work] it was in danger of the building get worse and worse.
“Stage two is, let’s see what the market will sustain and what we can get capital for, what Yale wants and what the city wants.
“We have discussed a hotel with them,” Lillis added. “It’s still a tough hotel market and we haven’t made a commitment to any flag [hotel operator] and we have been talking to people about office and student housing.”
Lillis hopes the new cancer hospital “will have an impact on demand drivers.”
“We’re aiming to have the project, whatever it is, done by 2011,” he said.
Science Park
At 25 Science Park, Winstanley Enterprises signed leases for several new tenants including YouRenew.com, which took 5,000 square feet (see story, page 22), and finished a 3,500-square-foot expansion for Higher One. About 9,000 square feet remain unoccupied in the 266,000-square-foot building, according to Carter Winstanley.
Winstanley’s new 1,180-space garage opened in October, and the company is looking to lease its nearly 26,000 square feet of retail space. In late November the first restaurant deal was “very close,” Winstanley reported, adding, “We hope to work with as many local retailers as possible, for any service-based retail from coffee shop to barber shop.”
Winstanley Enterprises also finished what Winstanley describes as a “complete core and shell rehab” of 344 Winchester Avenue, a 231,000-square-foot building “largely for Yale occupants.” The first tenant, the Yale Facilities Group, is taking 80,000 square feet.
In late November Science Park Development Corp. (SPDC) still was courting a local company interested in leasing more than 100,000 square feet in Tract A, a seven-acre part of the park.
SPDC President David Silverstone outlines several priorities for 2010.
“We want to begin construction on 150,000 square feet of commercial space on Tract A. That’s job number one,” he says. “Number two is to continue to attract new tenants to the park, and number three is to begin construction on a daycare facility on tract L, which will be about 11,000 square feet.”
Downtown Crossing
The city’s plan is to eliminate Route 34 between the Air Rights Garage and Union Avenue.
Carter Winstanley’s plan is to construct a 400,000-square-foot office and laboratory building between the Air Rights Garage and College Street. In late November, Winstanley said the project was in the design, permit and approval stage and he hoped to “have the building in place” by mid-2010. It is being designed by Elkus Manfredi Architects, a Boston firm known for its laboratory work, to “bridge the divide over Route 34 or in place of Route 34,” and “enhance the pedestrian experience in the area.”
Winstanley, whose 300 George Street building houses a mix of office and laboratory space and has been nearly 100-percent leased for almost three years, sees the need for a new downtown building with similar space to accommodate the “strong intellectual property and technology transfer” emerging from Yale University and Yale-New Haven Hospital.
The nearly two-acre site where Winstanley hopes to build it is currently owned by the state Department of Transportation.
The project “has a long way to go,” Winstanley acknowledges, and will need “a strong public private partnership to get there.
RETAIL
“Changed” is the word Lou Proto uses to describe the retail market in 2009.
“Constrained” may be a better one.
“With national retailers, as long as something was in the hopper, it was done,” explains Proto, principal of commercial real-estate firm the Proto Group.
Proto says he noticed the shift from expansion to contraction in November 2008, when retail deals began to be “put on hold or killed” and “if it wasn’t an A location, they started being very selective.”
The economic slump also hit local retailers hard, with few expansions and a “large turnover because of financing issues,” Proto says. “There are a lot of prime pieces of real estate on the Post Road in Orange and Milford and Route 5 in North Haven and Wallingford.”
As a result, landlords have been “very flexible” in working out rent reductions and other concessions to “keep tenants happy.”
Proto is rooting for an improved retail outlook in 2010.
OFFICE
“The economy really put a significant dent in companies planning to either expand and take new office space and companies looking to relocate,” reports Robert Motley, director of Cushman & Wakefield’s New Haven office.
Deals were down during 2009 and many companies decided to stay with existing landlords and “do short-term leases” for one or two years.
Even with the slowdown, overall New Haven County office vacancy rates reached record lows, not just in Connecticut but “in the country,” Motley said, adding by the end of the year they would likely be “well below ten percent” for the city of New Haven.
Covidien’s plans to move into added momentum to the downward trend.
The global health care products company is leasing 150,000 square feet at 555 Long Wharf Drive to house the administrative headquarters of its Surgical Devices business unit, according to Covidien spokesperson David Young. Around 400 employees will be relocated from offices in Norwalk and North Haven, Young says. The company has not yet set a date for the move, which will take place during 2010.
“If the economy stays the way it is or there is a slight uptick, there is a strong likelihood we could be looking at a shortage of Class A space in the next 12 to 18 months,” Motley says.
And that will be “good for owners, but not necessarily good for tenants,” Motley adds, because “rents are absolutely going to go up.”
INVESTMENTS
“Activity levels were way off” in 2009, says New Haven Group principal Steve Inglese. “This was the year of not enough distress creating enough opportunities for investors to jump in and do deals. Instead of banks taking property back, they are getting involved earlier and are more active in restructuring loans or selling the mortgages.”
Inglese believes 2010 will be a better year for transactions because “ there’s plenty of equity capital on the sidelines.”
So does George Smith of George J. Smith & Son in Milford.
“I thought the last six months we would have a lot of closings, but it is still very slow, with pent-up demand,” Smith reports. “The buyers who have good credit have been hesitant to pull the trigger.
“I really think 2010 is going to be a very good year for our office” market, adds Smith. “We are extremely busy, have added two brokers and are looking for two or three more.”
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