Market Snapshot: Hartford, Conn.

By Erika Schnitzer, Associate Editor Hartford, Conn.—Hartford County was supposed to be “New England’s Rising Star,” following New Haven, Conn. as a prime market for development, according to Marcus and Millichap’s National Multi Housing Group. Historically, the city—known as the insurance capital of the country—shut down after 6pm, when workers fled to their suburban homes, explains Steve Witten, senior director in the New Haven, Conn. office of Marcus & Millichap’s National Multi Housing Group. Over the past few years, however, new multifamily developments have been delivered and Hartford was beginning to build momentum.But then there were massive job cuts and stalled construction, and apartment fundamentals have weakened.“Hartford is probably more affected from the standpoint of apartment fundamentals and increased vacancy than New Haven, Waterbury and Stamford,” says Witten, adding that Conn.’s capital is the most volatile apartment market in the state.Vacancy rates for 2009 are expected to rise 150 basis points to 6.7 percent. Asking and effective rents will decrease 1.2 percent and 1.7 percent, respectively. The shadow market in this city is essentially nonexistent, Witten asserts, adding that the increased vacancy is due entirely from  the weakened economy.In 2008, Class B and C properties saw a 70 basis point rise in vacancy, while vacancies increased 100 basis points in Class A apartments.“What we didn’t anticipate was the toll that unemployment would have on occupancy levels,” Witten tells MHN. A market that typically sees 94 to 96 percent occupancy rates is now seeing levels of 90 to 92 percent. In the coming year, Witten says,“The anticipation, with respect to rents, is that we hope to see basically flat to modest negative growth.” He also anticipates marginal increases in rent—approximately 1 to 3 percent—that pick up in a supply-constrained market. Witten notes that some of the 500 units expected to be delivered to the market this year may be pushed back to 2010.As far as transactions, “In mid-2008, based on transaction velocity through the first six months, we thought we’d have a fairly strong year,” Witten asserts. “And then the market stalled.” Transactions decreased by 54 percent from 2007, and dollar volume was lower by 47 percent—although per-unit values increased by 17 percent. However, he expects to see a significant amount of REO properties and distressed real estate on the market.(Click here to read last week’s Market Snapshot on Orlando.)Chart  courtesy of Marcus & Millichap.