The impacts of the COVID-19 crisis are far-reaching, to say the least. In the real estate market, the ripple effects are just now starting to emerge. GOOD Morning Wilton consulted local experts Jeff Kaplan for insights on Wilton’s commercial real estate market and Dagny Eason for her assessment of the residential market.
The Commercial Market
A Wilton resident since 2006, Jeff Kaplan is Vice President of Investment Sales at TRUE Commercial Real Estate, a brokerage and consulting firm that represents both retailers and property owners in Connecticut as well as New York and other areas
Kaplan offered some perspective on the commercial market before the pandemic hit. “The market had found a good equilibrium,” he said, referring to the balance between rent prices and available spaces. In the aftermath of the 2008 real estate and financial crisis, rents fell, but as the economy improved over the last several years, both property owners and businesses in need of space were encouraged by their prospects.
COVID-19 was a total disruption to that equilibrium.
“It’s not a pretty picture, and it was sudden,” Kaplan said, describing the pandemic as a “black swan event”, a term typically used in the financial world to describe a rare, unpredicted and catastrophic event.
On the retail side, Kaplan does not expect the market to recover quickly. “[Many] businesses are closed, they can’t pay the rent. It’s not just the mom-and-pops. In some cases even the large companies, national chains, aren’t paying the rent,” said Kaplan. “There will be a lot of re-negotiating [leases]. It will take time for this to work through.”
On the office side, Kaplan sees the dynamics much differently. “Things have changed overnight.”
In the past, large office buildings dominated the marketplace. “In the 90’s we saw huge buildings developed,“ said Kaplan. ”[Companies wanted] big spaces for large workforces to come together in one spot.” Kaplan cited nearby FactSet in the Merritt/7 complex and other visible buildings in Stamford as examples.
To some degree before COVID-19, but especially now, “Businesses are realizing they just don’t need as much space.”
Coupled with another trend toward mixed-use spaces, Kaplan believes there will be a rapid “re-purposing” of existing commercial spaces. “Commercial owners need to do something to change the trajectory.”
Kaplan expects many commercial property owners will begin to re-purpose some existing office space for residential, retail and/or restaurant use. He believes this “absolutely will happen in Wilton,” he said, citing more than one “key commercial asset” in Wilton already examining the concept.
He cited Norwalk’s Waypointe, a development he worked for many years to see through, as one model of mixed-use space. “There was already a trend toward living in town centers, with no car, or a couple having one car instead of two, where you have shops and restaurants and a train all within walking distance.”
Closer to home, Kaplan has also been involved in the Wilton Mills project (formerly called Wilton Heights) that was approved for the former Wilton Crossways property (and three adjoining residential lots) located at 300 Danbury Rd./Rte. 7 at the intersection of Ridgefield Road.
“There was very high demand for the commercial space [at Wilton Mills],” Kaplan revealed. “The developer is committed to it.” In fact, he said, the project is “shovel ready,” with all town approvals and zoning matters resolved.
However, COVID-19 has brought the project’s incredible momentum to a standstill. Kaplan said, “We have to wait and see if people take the risk right now” i.e., opening a new restaurant or shop at a time when banks may be tightening their lending standards. “Fingers crossed,” he added.
But Kaplan recognizes it will take more than wishful thinking. He is most optimistic about property owners and businesses that are able to respond aggressively to the new reality. “They’re scrambling to run organizations and stay alive, but they also have to figure out how to respond going forward.”
Key to success, Kaplan believes, will be embracing new technologies and making workers feel comfortable, whether that means hiring full-time office cleaning crews or enabling workers to work from home. “We will get through it, but there will be short-, mid- and long-term changes.”
The Residential Market
Longtime Wilton resident Dagny Eason began working in real estate in 2006. After honing her skills during the toughest conditions of the 2008 housing and financial crisis, she launched her own agency, Dagny’s Real Estate, in 2011.
Eason believes a slowdown in residential sales was somewhat inescapable when COVID-19 arrived. March real estate closings may look typical, but as Eason explained,”Those houses were shown months ago. They have nothing to do with COVID-19. Those offers went through and they got their closings done.”
But activity necessarily slowed once COVID arrived in full force. “Everyone had to figure out how to get their food shopping done, how to work from home, where to get a mask. [Most] people had to put house-hunting on hold. Everyone was in transition.”
Eason understood sellers’ concerns. “[Some] people pulled their listings, like elderly people, and pregnant women, who didn’t want [outsiders] in their homes.”
At the same time, demand for house rentals has skyrocketed. One of her clients, a doctor starting a job at Yale on June 1, had been looking to buy, but decided to rent. Another client relocating from the Netherlands is still hoping to buy but, Dagny predicts, is likely to end up renting.
Fueling the rental market fire was a wave of people trying to escape the coronavirus outbreak in New York. Though most short-term rentals were prohibited in Connecticut by an executive order from Governor Lamont on April 2, there was nothing to stop New Yorkers from taking a long-term lease on a Wilton house rental.
Eason believes the strong rental activity is a good sign for Wilton’s real estate market: once renters move here and enjoy the town, they may eventually buy a home.
Hedging only slightly, Eason anticipates greater demand from New York buyers. “I have no crystal ball, but I think we will see a little exodus from New York, especially if they keep saying there is a threat the virus will return in the fall. People will ask themselves, what am I in the city for?” when they are working from home, confined to small apartments, with limited or no outdoor space, and afraid to take advantage of the city’s public places (if and when they open). Kaplan expressed a similar view, adding that these new buyers could help mitigate any downward pressure on home prices, especially in the “starter home” category.
Eason is cautiously optimistic about residential sales based on a “very noticeable” uptick in very recent activity. “I’m seeing new offers,” she said. “People are starting to adjust. Brokers are figuring out better ways to [market] houses. I really think we will see results from this new activity. Not immediately, but I think the June/July numbers will show it,” she said, adding, “unless we remain in lockdown.”
Another variable in all of this will be the jobs market. “[A lot of] lost jobs will have an impact,” she conceded.
Both Eason and Kaplan feel Wilton is well-positioned to capitalize on the potential opportunity coming out of New York. As Kaplan said, “Wilton is a good town, with good schools, and is well run. Wilton is and will continue to be an attractive place.”