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October 4, 2021

In Greenwich, recovery from the pandemic recession came quickly

Yehyun Kim | CT Mirror The whole family, from grandmother to three sons, joins to run Raphael’s Bakery in Greenwich. “Way better than we expected,” said Charlotte Dequeker about how the business is going. The bakery has been full of customers ever since it opened at the end of 2020.

Many communities have struggled to stay afloat following the pandemic recession, but Greenwich was buoyant.

Last spring, the pandemic abruptly shuttered dining, personal services and retail shops everywhere, putting millions of people out of work and forcing small businesses to pivot. Pastry chef Raphaël Dequeker — a fixture at high-end Italian eatery Valbella in Old Greenwich — quickly converted the restaurant’s kitchen into a pop-up bakery, offering two simple-but-perfected confections: fresh croissant and pain au chocolat.

What happened next might not have happened at all if the business were anywhere else in Connecticut.

Almost immediately, Dequeker’s devoted Valbella customers, many of whom work in the financial services sector, were strongly encouraging him to open his own shop. Investors stepped up, including health care venture capitalist and hedge fund manager David Eigen. At the time, Raphaël’s wife Charlotte worked for Eigen, and Eigen’s son Jack was apprenticing with Raphaël at Valbella. Eigen and a few other business-savvy locals and investors sat down with the Dequekers. Within a week, the startup bakery had a business plan with financial projections and marketing objectives.

Across the country and around the state of Connecticut, small businesses turned to their communities for support during the pandemic. Patrons raised emergency funds, nonprofit groups offered technical assistance, and federal and state governments disbursed loans and grants to keep the doors open. Still, roughly 200,000 more businesses closed permanently in 2020 than in an average year, according to the Federal Reserve, and it remains unclear whether 2021 will show any improvement. A recent survey of small businesses by Goldman Sachs found that 44% of proprietors have less than three months’ worth of cash on hand, and 31% aren’t confident they’d be able to access capital if there’s another emergency lockdown.

Raphaël’s Bakery, which opened its doors for the first time in late December of 2020, has been an exception. “The ball started rolling,” said Charlotte, who now runs the operation while Raphaël bakes. “When the investors started getting really excited and lined up, and the place started coming together, we were like, ‘OK, if we don’t do it now, we’re never going to do it.’”

Eigen said he thought the business plan was aggressive, but he was confident. “I invest in great people,” he said. “Raph is a master pastry chef. They told me their plan was to import all the flour and do it right. Seemed like a no-brainer.” The investors structured a deal, and Eigen went out and raised money from friends in Westport, where he lives.

By the end of this summer, Charlotte said they were already looking for a second location. “We had such tremendous reception from people — and help,” she said. “We had that business plan, and we are blowing everything out of the park.”

Being in one of the nation’s richest places during the COVID-19 recession and recovery had its advantages. Higher-income communities are doing better now because their residents recovered faster from the recession and resumed spending, said Balazs Zelity, assistant professor of economics at Wesleyan University in Middletown.

“A large fraction of the money a person spends ends up in the local economy,” Zelity said. “If a number of local residents re-start their spending, a virtuous cycle of spending will ensue, triggering a recovery. The more residents are in a position to participate in this process, the stronger and quicker the recovery will be.”

Greenwich even tacked on more residents in that position. This town and surrounding parts of Fairfield County experienced an “influx of well-to-do professionals” during the pandemic, Zelity said. Suburban areas were an early draw for thousands of New Yorkers getting out of the more densely-populated city as COVID-19 was spreading.

Real estate analysts said many of the transplants were temporarily relocating to summer residences they owned while keeping their homes in the city. Some moved in with family. But many were acquiring second homes or making the move permanently, which sharply drove up demand for residential real estate in Fairfield County.

It didn’t stop rising. Single-family home sales and sale prices were hitting records in Greenwich in the second quarter of 2021, even as vaccination rates rose and COVID-19 cases subsided. There were 322 single family homes sold in Greenwich at a median price of almost $2.4 million from April to June of this year, according to the Douglas Elliman Report. Compared to the same period in 2019, before the pandemic, the median price was up 17.2%, and the number of sales more than doubled.

“Because the economic damage from the pandemic was much more heavily felt by lower-wage earners, we really saw the high end of the market wake up,” said Jonathan Miller, author of the report. “The urban-to-suburban narrative was misplaced — it’s really about wealth, which generates mobility.”

Top of the ‘K’

Greenwich is a case study in what economists have described as a “K-shaped recovery” from the pandemic recession, where things improve for people at the upper end of the economic spectrum while those on the lower end struggle.

By August of this year, employment among U.S. workers making more than the median annual income ($37,000) was more than 8% higher than it had been before the pandemic. For workers making less than $37,000, employment was almost 12% below where it was in January 2020.

Greenwich — home to dozens of hedge fund offices and luxury designer shops, where yachts line the coves and harbors and fine dining establishments serve a regular clientele of moguls and celebrities — is decidedly on the upper leg of that ‘K.’ Per capita income in Greenwich before the pandemic was more than $100,000, and higher-income people generally have more money saved, which helps them more easily weather economic shocks and resume their normal consumption habits, Zelity said.

By many measures, this town now appears better off than it was two years ago. For one, locals say, it was nearly impossible to find available boat slips this summer. The marinas were fully booked.

A standout in Connecticut
Greenwich’s population of 63,000, which includes Gov. Ned Lamont, makes up just 1.8% of the state’s total population. But the value of all taxable property in the town — the equalized net grand list — accounts for nearly 9% of all property value statewide. The town’s roughly $50 billion in taxable property in fiscal year 2020 was the highest among the state’s 169 towns. Nine of the top ten towns, including Greenwich, were in Fairfield County.

In order to boost grand lists, and thereby tax revenue, towns across Connecticut look for ways to foster business development and attract corporate headquarters. For Lamont, it’s been a top priority, and during the pandemic, he notched some big wins. Fintech companies Tomo and iCapital Network, tech manufacturer ITT Inc. and Philip Morris International — the Big Tobacco icon looking to reinvent itself as an e-cigarette purveyor — have announced relocations to Connecticut this year. All are slated to make Fairfield County their home.

In Greenwich, iCapital is moving into offices at 2 Greenwich Plaza, a boxy, black glass building tucked between the town’s Metro-North Railroad station and the waterfront. That kind of prime location has been harder to come by in Greenwich since the pandemic.

Commercial real estate agents say the office market in Greenwich is one of a small handful in the U.S. that actually benefited from the pandemic. The office vacancy rate in the town’s central business district has remained below 20% and continues to fall, while lease rates are approaching $100 per square foot. That’s an outlier even in Fairfield County, where the overall average lease rate was $36 per square foot in the second quarter of this year, according to real estate brokerage Cushman & Wakefield.

“Greenwich still carries an international cachet amongst financial services companies, as well as other business leaders, so it’s been a natural migration,” said Jay Hruska of Cushman & Wakefield.

Hruska said while he’d initially thought the boom would be temporary, many of the town’s new office occupants have been signing long-term leases of five to 10 years. The Fairfield County commuter set appears to have become comfortable with the lifestyle change, he said. “There’s certain individuals that, if they don’t have to make that commute, will avoid it.”

And if they remain closer to home, they spend money closer to home. That’s helped Greenwich Avenue recover from months of uncertainty during and after the pandemic lockdown. Several storefronts had stood vacant but are now filling in, Chamber of Commerce president Marcia O’Kane said. The former Ralph Lauren building, for example, is going through the approval process and is slated for conversion into “an exciting mix of food offerings and a space to meet,” O’Kane said.

Charlotte Dequeker said she had expected business to slow down slightly at Raphaël’s Bakery during the summer months this year, as people went out of town on vacation. But the shop actually got busier, “I think because offices started reopening,” she said. “It used to be super busy on the weekends and a little quieter during the week. Now it’s pretty even.” That morning, a Tuesday, Raphaël’s had a line of nearly 10 people waiting when they opened at 8 a.m., she said.

By that afternoon, benches and tables outside Greenwich Avenue’s coffee shops and restaurants were full. Office workers stepped into The Granola Bar for smoothies while shoppers popped in and out of the Steinway & Sons piano store across the street.

At Funky Monkey Toys & Books, owner Jared Greenman said business has been booming. A third-generation toy shop owner, Greenman opened the Greenwich Avenue shop about three years ago and commutes to work from his home on Long Island. The location “fit the model” for his business, Greenman said, because of the combination of walk-in traffic, visitors and tourists, as well as the many local families shopping for birthday presents. “There is a lot of money in the area, so there is a lot of money to be spent,” he said.

The forum

According to the Connecticut Hedge Fund Association, there are more than 400 private funds located in the state, managing over $750 billion in assets. Each year, many of those hedge fund managers turn out for the annual Greenwich Economic Forum. The event was held virtually in November 2020 but returned in person this September to the ballroom of the Delamar Hotel in Greenwich.

Collectively, this year’s attendees represented several trillion dollars in assets under management. Ray Dalio, who leads one of the world’s largest hedge funds, Bridgewater Associates, was among the speakers. So was Annie Lamont, health care venture capitalist and spouse of the governor.

Gov. Lamont arrived just before cocktail hour on Day 1 and delivered brief remarks. “How was Annie, by the way?” he queried the room, gesturing to a far corner near the terrace doors. “That’s my wife over there.”

The governor, a former telecommunications executive, opened by describing his goal to “get the business community involved” in solving the state’s financial problems. He name-checked David Lehman, former Goldman Sachs partner who now runs the Department of Economic and Community development; Joshua Geballe, a former IBM executive and tech entrepreneur who now leads the Department of Administrative Services; and Sibongile Magubane, former head of IT strategy at Aetna who now runs the Department of Motor Vehicles. (Annie Lamont’s investment fund, Oak HC/FT, was a major funder of Geballe’s tech startup.)

“I’m really proud of the Greenwich Economic Forum,” Gov. Lamont said, calling out attendees with Connecticut-based companies. “You’ve got a friend in the governor’s office,” he said. “I’ll do anything I can to help you grow and expand right here.”

Adjacent to the Delamar ballroom is the hotel’s L’Escale Restaurant, something of an institution in Greenwich. Everyone from the finance crowd to town socialites, women’s clubs, politicians and designers are frequent diners; music industry mogul Clive Davis is a regular. The restaurant’s website describes the setting as “designed to transport the ambiance of Provence to the Gold Coast of Connecticut.”

But director of operations David Fletcher said 2020 was “a survival year” for the restaurant. L’Escale was closed for two months. On GoFundMe, patrons donated almost $20,000 in emergency relief for the restaurant’s staff. Even after the lockdown, reopening was incremental, beginning with takeout orders and then — with special permission from the town of Greenwich — a few outdoor tables on the seawalk. The restaurant’s banquet business, which accounts for a third of its revenue annually, was “zeroed out,” Fletcher said.

This year, by contrast, is on par with 2019, Fletcher said. Weddings and banquets are back, along with large-scale events like the Greenwich Economic Forum. Fletcher said his staff and clientele quickly got vaccinated against COVID-19 once the shots became available. (Proof of vaccination was required to attend the Greenwich Economic Forum.)

In many communities “contact-intensive jobs” like those in restaurants and retail haven’t come back as strongly as jobs in other sectors, Wesleyan University’s Zelity said, because potential hires and customers remain wary of the virus. Wealthier communities have skirted much of that — higher-income individuals have shown higher rates of vaccination, he said. “This can result in more restaurant trips, recreational activities, and so on, which can kickstart the local economy.”

Fletcher said diners at L’Escale like to discuss who got which vaccine faster than the other, and who is now getting a booster shot. “It’s a bragging point,” Fletcher said, “like a new Porsche or BMW.”

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