NORTHEAST SNAPSHOT, FEBRUARY 2005

Fairfield County and New Haven County, Connecticut Multifamily Market

The multifamily market in Fairfield and New Haven counties in Connecticut has been growing steadily since 2000, and the market has appreciated significantly in the past few years. Paul Leonard, partner at New England Multifamily LLC in the city of Fairfield, believes that the market will continue to perform well in 2005.

“The Fairfield County and New Haven County markets are expected to continue to appreciate, but at a slower pace than from 2000 to 2004,” says Leonard. Relatively high rental rates in major markets such as Stamford, Fairfield and Bridgeport, and scarce developable land have slowed development activity. According to Leonard, “New construction is being limited to reusing existing sites. The market is 95 percent developed, if not more.”

The redevelopment of former industrial buildings into loft apartments or condos has become a popular means to an end for multifamily developers in the area. Leonard notes that municipalities are willing to work with developers to accelerate the renovation of these properties producing little or no taxes and get them back on the tax rolls. In Bridgeport, the former R.L. Scinto industrial building on Federal Street has been redeveloped into 70 condominium units.

Aside from the adaptive reuse of industrial buildings, renovating or adding units onto existing multifamily structures has emerged as a viable way to create additional residences in the Norwalk-Stamford market. Examples include two redevelopment sites on Main Street and one on Isaac Street in Norwalk, which added an additional 100 units to the market.

Typical rental rates in Fairfield County (including all municipalities) range from $1,150 for one- and two-bedroom spaces to $1,600 for four-bedroom units. Rental rates can vary considerably among municipalities with towns such as Greenwich and New Canaan achieving rental rates of more than $3,000 per month. “Rental rates have remained static for the past year,” says Leonard. Vacancy rates remain low and have consistently held steady between 5 percent and 7 percent for properties with no functional or economical obsolescence.

One submarket that has the potential for greater multifamily growth in 2005 is an area known as the Valley, a corridor along Route 8 that stretches from Shelton to Beacon Falls.

On the investment side, Leonard has noticed a shift in focus. “Investors are becoming more concerned with the forecasted cash flows a property can achieve as opposed to relying so heavily on making money on the resale of the property a few years later,” he says. “Interest rates have become more paramount in projecting rates of return on multifamily investments. However, if investors look at multifamily investing as part of their long-range investment strategy, they should continue to do well and outpace many alternative, non-tangible investments.”

Fairfield and New Haven counties have strong employment bases with forecasted increases in population into the foreseeable future. As such, demand for rental housing should continue to be strong, spur further real estate development and allow for continued increases in property values.

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