The Hurley Group of New Haven is converting a multitenant office building at 55 Church St. in New Haven into lab-ready space for the Elm City’s growing biotech cluster. Image courtesy of The Hurley Group and Svigals + Partners
Growth of the life science industry in New Haven, groundbreaking of downtown Hartford apartments and a return to stability for the Fairfield County office market are expected to make headlines in Connecticut commercial real estate throughout 2022.
As Winstanley Enterprises continues construction of its 500,000-square-foot lab tower at 101 College St., a pair of developers are revamping New Haven properties to accommodate early-stage life science firms.
New Haven architects Svigals + Partners advised The Hurley Group to pursue a lab conversion strategy for 55 Church St. because of its large column-free floor plates, Hurley Group President David Goldblum said. The New Haven developer, which bought the multitenant office building in 2008, is updating base building systems to support life science uses and already signed up two tenants, Aztek Bio and Siduma Therapeutics, for nearly 19,000 square feet. The remainder of the 113,000-square-foot building is available for tenants in blocks as small as 6,300 square feet, Goldblum said.
“When I looked into the state of the market, I thought labs were a better option [than office space],” Goldblum said. “A lot of the things you have to modify in a building to convert it to labs were already in place.”
Rebranded as Elm City Bioscence Center, the building is getting upgraded plumbing, electrical and HVAC systems scheduled for completion within 120 days. Goldblum declined to give a dollar value.
The Hurley Group is targeting the “graduation space” niche in the life cycle of the biotech industry, in which startups seek their first dedicated labs with shorter lease terms than a traditional deal. The Hurley Group is offering leases in the 5-year range with flexible layouts, Goldblum said. He estimated market rents for lab space above $40 per square foot on a triple-net basis.
New York-based Twining Properties has gotten traction with its own life science play at the mixed-use Winchester Works redevelopment. Twining’s office-to-lab conversion at 115 Munson St. has been marketing small spaces for life science startups, most recently leasing 65,000 square feet to Guilford-based Quantum-Si Inc.
Twining Properties and its investment partner, Goldman Sachs Urban Investment Group, are reviewing additional proposals from prospective tenants, said Christopher Ostop, a managing director for JLL who represents ownership in leasing.
Record-breaking levels of venture capital investment in life science during 2021, spurred partly by the COVID-19 pandemic, are likely to enlarge New Haven’s industry cluster with its connections to Yale research, Ostop said.
“The rising tide is raising all ships in every market because of all the VC money, and Yale continues to cultivate innovation in life science,” Ostop said.
Concord, Massachusetts-based Winstanley Enterprises broke ground in June on the 101 College St. tower and has leased 160,000 square feet to New Haven-based clinical-stage life science researchers Arvinis Inc. and 125,000 square feet to Yale School of Medicine.
CRDA Backs Downtown Hartford Housing
In Hartford, the Capital Region Development Authority is partnering with developers on conversions of former state offices and a portion of the Hilton Hartford Downtown Hotel into apartments.
Norwalk-based Spinnaker Real Estate Partners is expected to begin conversion of former state offices at 55 Elm St. into 164 apartments this spring, pending the closing of construction financing, CRDA Executive Director Michael Freimuth said. The quasi-public financing agency is preparing to request proposals to redevelop 4 acres of surface parking on the opposite side of Capitol Avenue as a mixed-use project.
Stamford-based developer RMS Companies is seeking construction financing for a conversion of the upper floors of the Hilton building into 147 apartments. Hotel owner Waterford Group is in the process of switching the hotel management contract to Hilton’s Doubletree brand for the remaining hotel rooms on the lower floors.
Long-Term Confidence in Fairfield County Offices
Commercial real estate investors are showing confidence in the long-term prospects for the 41-million-square-foot Fairfield County office market.
Investment sales totaled $536 million in 2021, according to Avison Young research, up from $180 million in 2020 when potential buyers sat on the sidelines waiting to assess the impact of COVID-19 on in-person workplaces. Nearly half of the 2021 sales volume stemmed from Stamford-based Building and Land Technology’s sale of 200 Elm St. and 695 East Main St. to A.M. Property Holding and Northeast Capital Group.
Will Suarez, a principal in Avison Young’s Norwalk office, said the market appears to be returning to pre-pandemic levels. 2021’s investment sales activity was the highest in the past decade, eclipsing the $1.8 billion figure in 2016.
The recent transactions indicate investors don’t expect a widespread shift to remote work, Suarez said.
“We’re not seeing a total move to virtual: definitely not,” he said. “Work-from-home is starting to run its course, frankly. It’s true that COVID is stubborn and even if your building is 80 percent leased, the actual tenancy on a given day might only be 30 percent. Ultimately I think there will always be offices and there will be some resizing, for sure.”
Tertiary office markets such as Norwalk continue to struggle with high vacancies, and the countywide availability rate including direct vacancies and sublease space is currently 30 percent, according to Avison Young data.
