Q2 2012 New Haven, Connecticut Commercial Real Estate Economy

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Q2 2012 New Haven, Connecticut Commercial Real Estate Economy

The previously slow growing New Haven economy stagnated further over the summer. According to Current Employment Statistics (CES) data from the U.S. Bureau of Labor Statistics (BLS), total non-farm payroll employment increased by just 2,400 jobs (0.9%) from July 2011 to July 2012. All of this growth was accounted for by the primarily institutional Education and Health Services sector, which added 1,800 jobs (2.4%) year-over-year, and the low-paid Leisure and Hospitality Services sector, which also added 1,800 (2.4%). Were it not for health care, major educational institutions such as Yale University and its affiliates, and people eating and ordering out—perhaps students—total employment would be falling. It is falling by another measure. Household-based BLS data on the number of employed residents of the New Haven MSA, including the self-employed and commuters to expensive Fairfield County and in some cases on to Manhattan, show a decrease of 1,316 (0.4%) in the year to July. The labor force also fell, but both the employed and the labor force were smaller than they had been 24 months prior, in July 2010.

While area institutions provide employment stability, there is little to provide growth or support for commercial real estate. Office-based landlords are faced with a year-over-year decrease of 100 jobs (0.8%) in the Financial Activities sector as of July according to CES data, and a decrease of 700 (2.7%) in Professional and Business Services. While the Leisure and Hospitality sector has more jobs than in July 2007 and provide some tenant expansion for retail landlords, Retail Trade is up just 700 jobs (2.5%) from the low during the recession, all in the most recent July-to-July period. At one time New Haven, as the hub of the New Haven railroad, was a significant industrial hub in southern New England. That was decades ago, however, and while the industry still accounts for only a slightly smaller share of total employment than in the U.S. as a whole, the trend is slowly declining. During the most recent July-to-July period, the Manufacturing sector lost 500 jobs (1.9%), Construction and related sectors lost 600 (6.1%), and Wholesale Trade lost 100 (0.9%). Transportation and Utilities managed to break even, while remaining down 500 jobs from the pre-recession peak.

The most economically dynamic area of Connecticut in recent decades has been the affluent towns and cities of Fairfield County to the west, where lower taxes and a desire to locate jobs near the homes of top executives allowed headquarters and financial companies to be lured from New York City further south. But high housing prices and exclusionary residential zoning that limited multifamily development prevented all but the most affluent workers from living near those jobs, and congestion on I-95 made it difficult to commute there via motor vehicle. According to the National Association of Realtors, the second quarter median existing home sales price in the Bridgeport-Stamford-Norwalk MSA, where most of Fairfield County’s jobs are located, was $374,900, down 12.9% from a year earlier, but still far above the U.S. average of $181,500. In the New Haven-Milford MSA, the median price was a more modest $223,500.

To take advantage of Fairfield County jobs and lower housing prices in New Haven County and points east, the State of Connecticut established the Shore Line East commuter railroad in 1990. The MetroNorth railroad, owned by New York State but serving commuters from Connecticut to Manhattan, only operates as far as New Haven, but Shore Line East runs from eastern Connecticut through New Haven and, in some cases on to Stamford. The ride from Guilford, east of New Haven, to Stamford takes about an hour and fifteen minutes. But since 2000 economic problems in Fairfield, due to ongoing retrenchment in the Financial Activities sector, may be costing commuters from New Haven County job opportunities. The Bridgeport-Stamford-Norwalk MSA lost jobs in the Financial Activities sector, the Professional and Business Services sector, and the Leisure and Hospitality sector in the year to July. And with New Haven MSA household average incomes above the U.S. average according to Moody’s Economy.com, Fairfield employers are increasingly looking to the Bronx, New York, one of the poorest counties in the U.S., for workers.