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CRE values will see a bumpy road well into '09 yet Connecticut stays strong.

There's no call to toll the bell for CRE, as we discussed extensively at the Fall 2008 SIOR world conference in Minneapolis, there are dollars and financing available for smaller development projects (though not retail projects) and there is a market for green buildings. New buildings that meet LEED standards are in demand especially by universities and municipalities.

Real Share Westchester & Fairfield Counties echoed our conclusions. The retail sector is facing the biggest challenges in Commercial Real Estate. Large deals are also having trouble. Financing for smaller projects will remain the most available in the market. So the news is not all bleak, Peoples United Bank is reporting a stronger flow of deals in its pipeline and there are others in the market like Peoples that did not loosen underwriting standards. Those institutions still have money to lend and did not put themselves on the edge of ruin over the past ten years. So, the good news to take away is that while Retail suffers, smaller projects that make good business sense can be built.

Commercial Real Estate values in New Haven County have held up in this economic market that brings a new question every day. However, cracks are beginning to appear. Commercial Real Estate headlines that have been appearing around the country for the past three to six months are cropping up in Connecticut.

DDR, Developers Diversified Realty has put construction on their Guilford Retail project on hold. The retail development previously pitched as the ultimate destination for shoreline shopping, will halt construction as soon as site work is completed. The 155,000 square foot center was slated to open in 2009 with a mix of high end national tenants like J. Jill, Chico's, Panera Bread, Black House White Market and Barnes & Noble, as well as local and regional retail tenants.

According to DDR, the project has been put on hold because the local infill tenants have not signed leases.

In Bloomfield Michigan, DDR has put a $350 Million lifestyle retail project on hold. That project was more than five times the size of the Guilford project. It included 600,000 of retail space as well as 150,000sf of office space and about 100,000sf of residential condo units.

DDR was partnered with Coventry Real Estate Fund II in the project. DDR released a statement saying that the project was halted due to the partnership. According to DDR Coventry did not deliver on equity funding which had been projected to be 80% of the project cost.

While these may be the ultimate causes for the construction halts on both these projects, the overall economy and retail climate is a more likely culprit. As we all know, people are spending less. Consumerism is "out". Nationally retail sales have been dropping like a stone. In October, sales reached their lowest point since 1973.

-kristin


November 9, 2008


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