Top 3 Reasons to Invest in Commercial Real Estate in New Haven

Commercial real estate in New Haven, Connecticut, is attracting investors from all around the northeast region due to its international profile and high rental demand.

Located along the I-95 and I-91 corridors, New Haven enjoys Amtrak and local rail service to New York and Boston. Residents enjoy access to New Haven’s impressive 17+ miles of shoreline along the Long Island Sound. Its five public beaches, seven private beaches, and state parks include Silver Sands and Charles Island.

The city is a thriving community of generational, ethnic, and educational diversity; and is home to educational, healthcare, and cultural institutions.

Its emphasis on education and health sciences contributes to steady job growth, while New Haven’s arts and entertainment scene make it an enjoyable community to call home.

A Dive into New Haven, Connecticut

As mentioned above, New Haven is a coastal city in New Haven County in Connecticut. Located on New Haven Harbor, it is on the northern shore of the Long Island Sound.

With a population of over 130,000 people, New Haven is the third-largest city in Connecticut behind Bridgeport and Stamford, respectively. More than 74% of New Haven residents are renters, and as of 2021, ESRI estimates that the average household income is $78,155.

New Haven was one of the first planned cities in America when founded by English Puritans in 1638. According to the New Haven Register, eight streets in the city were laid out in a four-by-four grid, creating what is now commonly known as the “Nine Square Plan”.

The central most common block is the New Haven Green, a 16-acre square center of Downtown New Haven. The Green is now a National Historic Landmark. And the “Nine Square Plan” is recognized by the American Planning Association as a National Planning Landmark.

New Haven is a notable hub for higher education and is home to many campuses, including Yale, Albertus Magnus, University of New Haven, and Southern Connecticut State University. These educational institutes attribute to the city’s well-educated population. Almost 61.7% of the population over the age of 25 has a bachelor’s degree or higher.

The educated population has made New Haven a hotbed for innovation in the medical, educational, and biotechnology fields.

The top two employers in the city are Yale-New Haven Hospital and Yale University. Many large employers in the vicinity are Knights of Columbus, Alexion Pharmaceuticals, and United Illuminating.

Along with well-established corporations, New Haven is a sought-out area for young companies. In 2017, the city was ranked by a Verizon study as one of the top 10 cities in America for launching tech startups, with the top two in New England.

CoStar New Haven Statistics:

• Quarter 3 2021: Average price per unit: $205,400 | Average cap rate: 5.8%

Top Three Reasons to Invest in Commercial Real Estate in New Haven:

When discussing commercial real estate in New Haven it is important to recognize the benefits New Haven has on the overall state’s economy.

1. New Haven: Cultural Capital of Connecticut

New Haven is a blend of traditional, contemporary and is home to a robust talent pipeline, a growing number of bioscience companies, and a plethora of cultural attractions. Its expanding health and tech communities have created the need for new and improved work, residential, and entertainment spaces.

This combination provides the perfect opportunity for investors seeking either value-add New Haven multifamily properties or adaptive reuse projects in the area.

The District is an example of how commercial real estate in New Haven can be a great opportunity. Located on the outskirts of New Haven’s affluent East Rock neighborhood is a recent adaptive reuse project that turned an old garage into an innovative tech business campus. Exemplifying a trend of developments adjacent to desirable neighborhoods that expand the demand for housing in these areas. Here is a list of the many aspects that make New Haven such a diverse and rich-in-culture location:

• Production Houses and Theaters: Shubert Theatre, Long Wharf Theatre, New Haven Theater Company
• Museums: Yale University Art Gallery, Yale Peabody Museum of Natural History, New Haven Museum, Connecticut Children’s Museum
• Music: College Street Music Hall, Toad’s Place, Westville Music Bowl
• Newspapers and media: New Haven Register, New Haven Magazine, Yale Daily News, Yale Herald
• Sports and athletics: Yale University Hockey, gyms, training facilities

2: Yale University’s Benefits on the Economy and Commercial Real Estate in New Haven

This private Ivy League research university was founded in 1701 and is the third-oldest institution of higher education in the United States. The University is one of the city’s top three taxpayers.

• It serves as an integral part of the city’s economy in many areas such as healthcare (hospitals and biotechnology), financial services, professional services (legal, engineering, marketing, and architectural), and retail trade.
• Yale University has close to 14,000 faculty and staff. The school employs nearly 6,000 New Haven residents.
• The University provides cultural resources for the community, such as museums, exhibition spaces, concerts, and theatre productions.
• Every non-profit university in the nation is exempt from paying taxes on their university-owned properties. But, through its community investment program that redevelops nearby property, Yale pays real estate taxes – over $5 million this year – on all of its non-academic property.
• Yale University supports the local youth including, being the primary donor for scholarships offered by New Haven Promise. Through the organization, Yale provides up to $4 million per year every year for city residents who graduate from a New Haven public school and attend college in Connecticut.
• Yale contributes to the revitalization of neighborhoods. The school has committed funds to the restoration of Scantlebury Park and the Farmington Canal. And the improvements of streetscapes through the creation of pedestrian and bike paths.
• The Yale University Homebuyer Program strengthens the tax base of the city. It has committed to providing $34 million in funds to assist nearly 1,300 employees when they purchase a home in New Haven with a total value of approximately $245 million. Some neighborhoods that have benefited from the program include West Rock, Beaver Hills, Dixwell, Dwight, Newhallville, Fair Haven, and Hill.
• The school fosters economic development in the city of New Haven. Since 1990, in addition to its homebuyers program, Yale has contributed over $40 million to economic development initiatives including, providing funds to the Economic Development Corporation of New Haven, Start Community Bank, Science Park, and Broadway and Chapel Street investment programs.
• Yale University’s healthcare contributions are a big draw for investors. This draw increases the demand for multifamily housing in the area.

3. Demand for Commercial Real Estate in New Haven

High single-family housing costs and an energetic downtown lifestyle are dual drivers for residents seeking to rent rather than buy in Connecticut’s most dynamic small city.

These unique demographics translate into strong local occupancy rates and rent growth. There are many different types of investment and commercial real estate in New Haven, such as multifamily buildings, offices, mixed-use, and warehouses, that may prove to be valuable investments for you.

New Haven is a fantastic place to live if you want to be exposed to all the great opportunities the city provides. New Haven is also a great place for investing in offices and work opportunities.

Commercial Real Estate in New Haven Office Statistics:

If you’re looking to invest in Commercial Offices, New Haven may be the place for you. Below you’ll find a chart of the average 2020 office rents in New Haven by asset class.

Commercial Cafe

“This is a vibrant, growing community that is unlike any other in Connecticut. As redevelopment continues across the city and employers expand their footprint in Greater New Haven, the market only stands to become stronger for multifamily investors. What’s unique about New Haven is that the vitality of the city isn’t isolated to one neighborhood.” -Brad Balletto, VP of Investments

Ongoing Development in New Haven

Contributing to the favorable ecosystem for commercial real estate in New Haven is the fact that city officials choose to support city-wide development. Below is a list of some of the ongoing development happening in New Haven.

• Connect 35: Amtrak has outlined its Connect 35 expansion plan, a $117 Billion plan across 150 projects in the Northeast Corridor. These projects include reducing service time to New York by nearly half an hour and increasing train frequency by 33%.
• The Yale Wu Tsai Neuroscience Institute: This project was announced in 2021 and will move into its primary address at 100 College Street by 2022. The institute aims to catalyze and integrate the existing and growing infrastructure in neuroscience to provide a global framework.
• 101 College Street Bioscience Lab and Office: There is a new planned 10-story bioscience lab and office tower in the works that began construction in the summer of 2021. This 500,000 square foot lab will create nearly 1,000 new permanent jobs for the area. And 1,000 temporary construction jobs are required to complete the project.
• Downtown Crossing: The city of New Haven’s Downtown Crossing Project is an infrastructure project which will transform the portion of Route 34 in New Haven from expressway into urban boulevards designed for pedestrian and bicycle use, as well as low-speed motor vehicle traffic. The project will make it safer and easier for pedestrians and bicyclists to enjoy the city and provide new opportunities for economic development.
• Yale New Haven Hospital St. Raphael Campus: The Yale New Haven Hospital is developing a 505,000 square foot, $838 million neuroscience medical research and treatment center on its St. Raphael campus. This center will help link and network the vast neighborhood surrounding the Yale community with the growing pharmaceutical research in the city and Science Park, providing state-of-the-art manufacturing and laboratory facilities that attract biotech firms to the county.
• Coliseum Redevelopment: LWLP (Live Work Learn Play) is redeveloping the New Haven Coliseum into a dynamic mixed-use district that will transform it into an exciting new neighborhood, including residential, retail, public space, hotel, and below-grade parking. This redevelopment is substantial for commercial real estate in New Haven. The Coliseum site is strategically situated in Downtown New Haven at the nexus of the city’s economic activity. Near major educational and medical institutions, including Yale University, as well as other major employers. The site is also within walking distance from New Haven’s two train stations and sits at the primary vehicular entrance to downtown. Connecticut has invested $21.5 million into this project.

Finding Commercial Real Estate in New Haven

To find the right New Haven investment property for you, you should seek a relationship with a commercial real estate broker with a strong track-record in the specific asset type and submarket which interests you.

For more information on how to find the best investment property for you (no matter where you’re looking), read our blog;  How to Find Gems in Massachusetts Commercial Real Estate.