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CT Commercial Real Estate Survey Shows Slowed Activity During Second Quarter But Investment Favorable


The latest quarterly survey on Connecticut real estate conditions, conducted jointly by the Connecticut Business & Industry Association (CBIA), the Connecticut Economic Resource Center (CERC), and DataCore Partners LLC, shows that overall activity slowed a bit in the second quarter of the year as the retail sector faced challenges from higher oil prices, gains in consumer purchasing power slowed, and local labor markets experienced varying degrees of weakness.

According to new CT COMpREhensive survey results, the Farmington Bank/ODMD Commercial Real Estate Index fell to a level of 13.8 in the second quarter, down 14% from the first quarter index reading of 16.0.

“The latest data reflects a commercial real estate market that is still facing challenges in the form of cautious consumer spending, and persistently high oil prices which are now just below the $100/barrel mark,” said Peter Gioia, vice president and economist at CBIA. “In effect, higher oil prices are still siphoning off discretionary consumer spending that could be used more productively elsewhere in the economy.”

“Local economists have stated that the levels of both consumer and business confidence, as well as job growth, will be instrumental in determining the path of overall economic activity for the balance of 2011,” said Alissa DeJonge, director of research at CERC. 

Other findings include:

  • Respondents were generally pessimistic with respect to the near-term outlook for the Connecticut economy over the next three months.
  • Fundamentals surrounding the Connecticut Office Market eroded somewhat in the second quarter as employment growth was arguably erratic. Demand for labor remains sluggish relative to prior economic recoveries as many area employers seem to be adopting a “wait and see” approach to permanent future hires. Greater emphasis has been placed on temporary hires over the last year as a result.
  • The Connecticut Industrial Real Estate Market has clearly been impacted by the global slowdown in economic activity as orders for durable goods fell sharply in April.
  • On the positive side, Connecticut Manufacturing Employment appears to have stabilized over the near-term and has posted a mild 0.9% YTD gain for the first four months of the year.
  • Connecticut’s Retail Markets are continued to be hampered by higher state and local taxes, higher oil prices, and greater overall economic uncertainty, which is having a negative impact on regional consumer confidence measures. According to the Conference Board, overall consumer confidence for the New England region was recorded at an index level of 60.3 in May, about 20-30 index points away from what consumers would deem real economic recovery.
  • The environment for Connecticut Investment Real Estate appears to be improving modestly based on tepid strengthening economic recovery, cheaper capital, and somewhat higher profit margins. Of the four commercial areas, investment real estate once again saw the most favorable readings.
  • The fundamentals around Residential Real Estate are have clearly been impacted by the health of the local labor markets. In effect, improvement within the residential market has been a function of traction developed in the local labor market, and therefore improvement in the residential sector has been slow to develop.

“The consensus of economic opinion is that economic recovery has slowed somewhat in the second quarter because the primary generators of consumer wealth – stocks, jobs, and housing – have all displayed varying degrees of weakness,” said Bruce Blasnik, Partner at ODMD.

“The good news, though, is that most local economists do not foresee the Connecticut economy encountering the dreaded “double-dip” recession following one of the worst economic downturns dating back to WWII,” added John Patrick, President & CEO of Farmington Bank.

“To a large degree, the weakness in personal consumption can be traced back to substantially reduced gains in Connecticut real disposable income (RDI) - namely income after taxes adjusted for inflation - the broadest measure of consumer spending power,” said Don Klepper-Smith, chief economist and director of research at DataCore Partners. “In prior expansions, RDI has often seen annual gains in the range of 4%-5%,” he added. “In the current recovery, however, growth in consumer spending power is about a quarter of what would be considered normal, climbing a little more than 1% on a YTD basis as of April 2011.”

The survey was conducted during the April-May timeframe and polled real estate professionals in all eight Connecticut counties, asking for opinions and perspective regarding local real estate conditions in both the residential and commercial markets. There were a total of 98 respondents who participated in the most recent survey, and included real estate brokers, real estate developers, bankers, appraisers, and economic development officials from around the State.

The executive summary of this quarter’s CT COMpREhensive and Farmington Bank/ODMD Index is available at and

About the Farmington Bank/ODMD Commercial Real Estate Index
The Farmington Bank/ODMD Commercial Real Estate Index is a diffusion index measuring the health of Connecticut’s commercial real estate market, assessing conditions within four key commercial real estate sectors: office, industrial, retail, and investment. The index is sponsored by both Farmington Bank of Farmington, and O’Connor Davies Munns & Dobbins LLP of Stamford.

About CBIA
The Connecticut Business & Industry Association (CBIA) is the largest, most representative business organization in the state. Its members include businesses of all sizes from nearly all industries in Connecticut. The organization is the leading voice at the State Capitol and before regulatory agencies for policies that promote economic growth, a fiscally responsible state government, and a dynamic business climate.

About CERC
Based in Rocky Hill, the Connecticut Economic Resource Center, Inc. is a nonprofit corporation and public-private partnership that provides objective research, marketing and economic development resources consistent with making Connecticut a more competitive business environment.  For more information, visit and connect to CERC on FaceBook, LinkedIn and Twitter (@cercinc).

About DataCore Partners, LLC
DataCore Partners, LLC is a New Haven-based research firm headed by chief economist and director of research Don Klepper-Smith.


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