State’s Commercial Real Estate Market Shows Slight Improvement
Results of a statewide survey show that Connecticut’s commercial real estate market—like the economy in general—continued to show signs of mild recovery.
Findings from the latest Connecticut Commercial Real Estate Survey were presented at the annual Fairfield County Commercial and Industrial Real Estate Outlook, held this morning at the University of Connecticut’s Stamford campus.
Recovery Steady—But Slow
Fourth-quarter activity in commercial real estate maintained moderate positive momentum, said Jason Giulietti, CBIA research economist.
“What we’ve been seeing is continuing slight gains, with the index improving for both current and future conditions,” he explained. “But until we begin to see more solid and substantial growth, our survey results offer only cautious optimism.“
The index used to gauge survey responses measured the health of Connecticut’s commercial real estate market, assessing conditions within four key commercial real estate sectors: office, industrial, retail, and investment. It has two primary components: one measuring current conditions; the other, future expectations in the marketplace three months out.
Jobs Are Key
Current conditions for industrial, office, and retail real estate sectors were rated “fair” or “poor” by more than 90% of survey respondents, who included commercial real estate agents, brokers, developers, and appraisers, as well as bankers and economic development professionals.
Though Connecticut gained 8,300 new jobs over the last 10 months, demand for labor was generally sluggish, with many area employers adopting a wait-and-see approach to permanent hires.
Expectations for Connecticut’s office real estate market reflected these realities, as 76% of respondents anticipated sales prices for office space will decline to varying degrees over the next three months; 73% predicted soft lease prices as well.
Similar trends were forecasted for the industrial and retail real estate markets. Of the four commercial areas, investment real estate saw the most optimistic readings by a slight margin, fueled by prospects for new growth and cheaper capital.
Numerous studies indicated that Connecticut was unlikely to see serious job gains until 2012, Giulietti pointed out. “We have a long way to go before we regain the 103,000 jobs lost in the recession. And we won’t get there unless policymakers and legislators do everything possible to encourage businesses to create jobs here.”
While the economy might have exited the recession in 2010, residential and commercial real estate lagged, said Giulietti.
“Obviously, conditions are extremely challenging right now. Substantial vacancies in all of Connecticut’s central business markets—from Hartford to Fairfield—are evidence of the difficulty real estate brokers and landlords have faced in maintaining revenue streams from rentals and sales.”
On the flip side, he noted, the depressed commercial real estate market gave some companies an edge: higher vacancies and falling rents meant more options for business tenants looking to rent space or renegotiate terms. Indeed, the survey revealed that many respondents—41% or more—expected the number of sales transactions in the next quarter to increase for each of the four commercial markets.
The quarterly Connecticut Commercial Real Estate Survey is a joint project of the Connecticut Business & Industry Association (CBIA), Connecticut Economic Resource Center, Inc. (CERC), and DataCore Partners. It is sponsored by Farmington Bank and O’Connor Davies Munns & Dobbins.
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