Years ago, the real estate market in our state not only flourished but was successful on many different fronts: commercial as well as residential, urban as well as suburban. These days, it’s a bit of a different story—and one that attorneys in particular should pay attention to in terms of their unique needs.
Today the real estate market in Connecticut is very location-driven. Unlike the homogeneous market of the ’70s and ’80s, it now is broken into segments. Overall investment in the real estate market is still vibrant; however, we are starting to see an increase in the cost of borrowing, which is going to have downward pressure on the market value of particular projects.
Today we see a widening of interest in Connecticut commercial real estate—major national investment firms and institutional investors are increasingly interested in buying projects in central business districts, primarily for apartment, retail and so-called trophy office buildings.
Institutional investors are emerging from New York and New Jersey and, to a lesser degree, even the West Coast. Today, many of their projects become real estate investment trusts (REITS), while fewer and fewer large investors from Connecticut are represented here.
The real estate market is not singular. With that in mind, it is interesting to note that different market sectors are experiencing markedly different levels of interest.
In the industrial market, for example, which has reinvented itself over the years with renewed development in such cities as Stamford and Norwalk, former industrial properties have been repositioned as office and retail developments. The result is a shortage of modern industrial buildings for lease and sale in Fairfield County.
On the other hand, there is an increasing appetite for industrial properties in Shelton, Trumbull, Monroe, Stratford and Milford, where product availability is significant and new development opportunities exist due to land availability.
Meanwhile, the leasing market for office space in the state’s central business districts remains soft. Vacancy rates remain high. We’ve seen several major occupants move out, leaving big blocks of space, especially in Stamford. Most leasing is from tenants already in the market who are moving from one location to another. Sadly, we are not seeing the urban market stiffening up at all.
Suburban office markets, on the other hand, are enjoying somewhat of a more moderate vacancy rate with smaller tenants occupying properties in such towns as Norwalk, Westport, Fairfield and Southport, especially.
What is most attractive to investors right now?
Apartment properties are enticing, and that market is red hot: Both individual investors and investor groups are actively looking for those properties. We’ve seen an increase in development of apartment buildings.
What does all this mean for attorneys? A burst of new satellite offices.
Fifty years ago, law firms were almost exclusively located in offices close to courthouses. Then came the information age, which had a dramatic effect on the location of offices—they no longer had to be near the courthouse. Now we are seeing demand for law firms to have satellite offices in suburban areas. Large firms from New York, Hartford and New Haven are establishing offices in suburban areas.
The other issue is space. In this information age, law firms no longer need huge libraries within their footprint. They just do their research online. This allows lawyers to have satellite offices, since there is no need to return to a main facility for legal research. One law firm for many years had almost 10,000 square feet of library space—all of which is no longer required.
Another trend we’ve noted is the rise of specialization. Now we have lawyers who specialize in environmental laws and issues, a phenomenon that didn’t exist 50 years ago. Attorneys, like physicians, have become specialists (although that is a term they prefer not to use). Large firms have departments dedicated to very specific branches of law. Again, that dictates how much office space is needed, and where.
Non-Connecticut law firms already are coming to our state, mostly from New York City because, as you might guess, where their client base goes, they go as well.
Law firms looking for new space often ask, does the building have high-speed internet? Does it have backup power generators? Developers typically are sensitive to this and provide high-speed internet—in many cases through more than one vendor per building.
Real estate is a’ changing, and attorneys may be well advised to keep abreast of changing opportunities.
Randy Vidal is the founder of Westport-based Vidal/Wettenstein in Westport.