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May 8, 2023 REAL ESTATE

Workplace Downsizing: Small office spaces trending in greater New Haven

PHOTO | Courtesy Reno Properties Group An aerial view of the Cheshire Professional Park.

Real estate brokers across greater New Haven are seeing an uptick in smaller space leases in commercial buildings.

Dan Garofalo, a partner and managing broker at Reno Properties Group, is happy to see a resurgence of tenants, many of them psychotherapists, leasing properties the company owns, manages and maintains in Cheshire.

“We took a blow when Covid came around because therapists were allowed to bill while working from home without maintaining an office,” Garofalo said. “We saw an exodus from a couple of different properties.”

Now, he says therapists are coming back.

“They’re finding that it’s hard to live and work in the same environment, and people want to see you in person,” Garofalo said. “The therapist doesn’t want clients coming into their homes. Some people are diving into having a space for the first time.”

Connecticut Counseling Center and Clarity Counseling returned to newly renovated space in the Cheshire Professional Park on Highland Avenue.

Reno redid the offices with fresh paint and flooring and with a three-year lease, offered the first three months rent free.

Connecticut Counseling Center took 3,600 square feet of space and added therapists to the business, an increase from the 750 square feet of space they occupied pre-pandemic. Creative Counseling has grown as well.

Dan Garofalo

Garofalo is concerned that inflation, higher interest rates and the price of electricity are all weighing on business owners and affecting their decision to rent space.

“People are apprehensive,” Garofalo said. “On the one hand, I like having the office, but don’t really need it. But I can’t see doing this from home; meeting with a client, for example. They are constantly battling; do I need the small office space?”

Despite these factors, he’s seeing more activity and inquiries about available office space.

Another Reno property, Middlesex Professional Park, located just off Route 9 in Middletown, has attracted a hot yoga studio, a non-profit organization and more therapists looking for office space.

Reno is using old school marketing to find business, including direct mail, door to door canvassing and working with economic development directors of towns.

“There’s always a demand for space; people have to conduct business,” Garofalo said. “You just have to dig a little harder to find customers.”

Jeremy Rosner, a senior vice president at Levey Miller Maretz, a real estate services company based in Woodbridge, said there are hardly any vacancies at 85 Willow Street, one of its signature properties in New Haven.

Jeremy Rosner

Small office spaces there are quickly snapped up by start-ups in the medical and biotech industries. Most recently a furniture designer, TZ Design Inc. from Brooklyn, took space there.

“Small office spaces go very quickly down there,” Rosner said. “There are some artist lofts and small spaces used by entrepreneurs just starting out. Three hundred to 1,000 square feet is considered small.”

A number of start-ups coming out of the biotech industry call 85 Willow Street home. Wellinks, a startup that created a virtual platform for treating chronic obstructive pulmonary disease (COPD) operates there, as does Protein Evolution, a company that’s developing new technology for plastics recycling. Both these companies have funding from investors.

“These companies are able to survive in an inflationary environment because outside investors are giving them money for their operating costs,” Rosner said. “Inflation is going to slow growth, but companies with outside funding don’t pay too much attention to those costs.”

He’s confident tech startups will continue to thrive and need office space. Other industries are still working, but their need for space is contracting, according to Rosner.

“Lawyers and architects are still working in their homes,” Rosner said.

A web services company that Rosner leased space to went from a 5,000-square-foot office pre-pandemic to 600 square feet. Most of the employees continue to work from home and pop into the office for meetings and conferences.

The law firm Day Pitney has offices in New Haven, Greenwich, Hartford, West Hartford and Stamford. It is moving its Hartford offices to a smaller footprint in the fall. Employees there generally work a hybrid schedule, coming into the office at least three days a week, a firm spokesperson said.

Kathleen Monnes, office managing partner of Day Pitney’s Hartford office, said the Hartford office is moving to Goodwin Square with a 10 year lease.

“We will be reducing our total space somewhat, while still ensuring enough offices for our current roster of attorneys, with room for growth,” Monnes said.

Suburban trends

Kristin Geenty, president of the Branford-based Geenty Group commercial realtors, agrees that small spaces are definitely becoming of more interest. But she’s noticed a sub-trend of demand for tiny spaces in the suburbs.

Kristin Geenty

Offices with less than 500 square feet, big enough for one or two people, are hot, according to Geenty.

“What that indicates to me is therapists and consultants are starting to go back into office spaces. People who went home are looking for small satellite offices because they don’t want to work from home anymore,” Geenty said.

Micro spaces are often occupied by entrepreneurs. Others, like digital marketing firms, app developers and tech-oriented businesses have chosen co-working spaces like District in New Haven where they’ll find opportunities for synergy and brainstorming.

Geenty is also noticing a trend of legal offices shrinking their real estate footprint. For example, if a firm occupied 5,000 square feet in a city pre-pandemic, they are now occupying 2,000 to 3,000 square feet in the suburbs close to where the partners live, she said. Some office staff are still working remotely, hence the need for less space.

Electricity costs are certainly a challenge, Geenty added. Landlords who previously included electricity as part of the rent are now asking tenants to pay at least a portion.

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