NORTHEAST SNAPSHOT, OCTOBER 2005
Connecticut Multifamily Market
The Connecticut multifamily market is forecast to mirror the national trends of stable conditions and relatively healthy fundamentals for the rest of the year and into 2006. In Hartford, apartment vacancy stands at 5 percent, up 10 basis points from year-end 2004. The vacancy is substantially higher than the 5-year average, reflecting the city's economic difficulties. However, 5 percent is still below the national average of approximately 6.4 percent vacancy.
Hartford is undergoing a substantial revitalization effort that should pay off in the near future. Currently, median asking rent is $845 per month; an increase in asking rents should occur and new high-end units become available. Hartford has few upper-end units and experts expect that these new projects will lease quickly. Class A properties are selling for between $80,000 and $125,000 per unit; Class B and C communities are selling in the range of $32,000 and $65,000.
New Haven County's apartment market is recovering steadily as developers pursue both new construction and infill residential conversion opportunities.
Vacancy currently stands at 4 percent, well off the cyclical high reached in the second quarter of 2003.
Rent growth is expected to accelerate, with overall asking rents rising to $960 per month by year-end. During the next 5 years, metro area rent growth is forecast to average 1.7 percent annually. The Naugatuck/Waterbury submarket is expected to experience a substantial 4 percent growth in asking rents, while rates will remain relatively flat in the Metro-New Haven and North Haven/Wallingford/Meriden submarkets.
In New Haven County, Class A apartment properties are selling in the range of $85,000 to $146,000 per unit. The price range for Class B and C properties is $41,000 and $61,000.
In Bridgeport in Fairfield County, two developments are underway. One is the conversion of the Citytrust Bank Building into 118 apartment units. Completion is expected in July 2006. The other development project is Bridgeport Landing, an expansive mixed-use project along Bridgeport's harbor front. The residential portion of the community could include between 1,500 and 2,000 units. The developer, Midtown Equities, has yet to set a start date for that project.
With few construction starts, historically high occupancy and healthy rental growth, Connecticut remains a strong market for multifamily sales and rentals and should stay on course well into next year.
— Steve Witten and Victor Nolletti are senior directors of Marcus & Millichap's national multi-housing group in New Haven, Connecticut; Mike McGee is a financial analyst with Marcus & Millichap.
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