Hartford Business Journal

18 HARTFORDBUSINESS.COM | MAY 31, 2021 FOCUS: Real Estate By Matt Pilon mpilon@hartfordbusiness.com A cross from Dunkin' Donuts Park in Hartford's Downtown North neighborhood, developer Randy Salvatore began building 270 new apartments last fall and he's already making plans for the next batch of a few hundred more. Salvatore, CEO of Stamford- based RMS Cos., brushes aside any suggestion that the COVID-19 pandemic — which fueled significant demand for single-family homes — has made multifamily property investment more tenuous. "I remain as bullish as ever about the long-term prospects for Hartford and this development," Salvatore said in a recent interview. "Time is the most prized possession for a lot of people. They work really hard and they don't want to be doing yard work on the weekends and going to Home Depot to buy a part to repair the toilet. They want to be able to just enjoy themselves." For those and other reasons, even if it means giving up on a spacious private backyard, experts say apartment living is here to stay, and the boom in new multifamily developments in Greater Hartford is showing no signs of letting up. Major newly constructed or proposed apartment projects have been springing up across the region in recent months, whether it's in the suburbs of Farmington and Bloomfield or the cities of Hartford and New Britain, a sign that developers still have significant appetites for new market-rate and highly-amenitized rental units. According to CoStar, 2020 saw the net delivery of nearly 1,100 new apartment units in the Greater Hartford market. It's not an earth- shattering number; it's down from 1,300 units in 2019, but experts say the fact the region nearly matched the trailing five-year average number of new units during the pandemic is a sign of the sector's strength and resilience. Meanwhile, vacancy rates remain in the single digits overall. "Even as new units are built, the overall occupancy rate in and around Greater Hartford is terrific — they are absorbed quickly," said Victor Nolletti, an executive managing director at multifamily brokerage and advisory firm Marcus & Millichap's New Haven office. "Clearly the demand remains." Salvatore says he welcomes the competition. "I think Hartford needs more housing, and more housing will bring more restaurants and better retail options, which will bring more housing," he said. "I think that's what creates vibrant cities. The more the merrier." Things seemed much more dire in the early months of the pandemic, said Jeffrey Tesch, CEO of South Windsor-based multifamily lender RCN Capital. "A year ago I would have said multifamily is in trouble, but it just didn't happen," Tesch said. "It just goes to show you the real lack of availability in housing choices. There just aren't a lot of empty units in general." Michael Freimuth, executive director of the Capital Region Development Authority (CRDA), which finances market-rate apartments mostly in the city said he has wondered about when demand for new apartments might slow, but he hasn't seen any signs of that yet. "We put out about 2,200 units [in downtown Hartford] over the past eight years and they're running at about 90% occupancy," Freimuth said. "I think we're able to comfortably absorb 300 to 500 units a year, which has generally been our building pattern." Investors seek stable yields While the pandemic has not caused multifamily investors to lose confidence, it has had a greater effect on other real estate sectors. Jeffrey Dunne, a vice chairman at realty brokerage firm CBRE, whose team recently brokered a nearly $35 million sale of the 180-unit Alvista Willow Brook apartments in Meriden to an experienced local operator, said investors are increasingly flocking to multifamily, following turbulence in retail and office space. "There are more dollars chasing deals coupled with some of the lowest interest rates in the past 50 years," Dunne said. "Apartments are the product of choice for many investors." Out-of-market investors continue to sniff around Connecticut, drawn by the allure of potentially higher returns, or "cap rates," compared to more competitive real estate markets. "They hunt in secondary or tertiary markets for greater yield," said Dunne, who predicts a short-term slowdown in construction activity due to price spikes in materials costs over the past year. Demographics, demand Connecticut is not known for booming population and job growth, so continued investment in building new apartments can seem like a bit of a head-scratcher. Even seasoned developers admit to not fully understanding each individual element of demand for new units, which can vary by location, but that's not a major concern so long as it keeps up. "People are moving out of older product so you would think the older product would have a large vacancy rate, but that's the thing: it doesn't," said Avner Krohn of New Britain- based Jasko Development, which has 700 apartments — not all of them yet publicly disclosed — in the planning or construction pipeline, including an 111-unit project in Bloomfield that broke ground a few weeks ago. "There is definitely some variable I don't think anyone can put a definite finger on." When it comes to greater Despite hot housing market, Greater Hartford apartment boom rolls on Jeffrey Dunne Jeffrey Tesch Victor W. Nolletti Michael Freimuth Demand for single-family homes has spiked since last year, but developer Randy Salvatore, who is building hundreds of new apartments in downtown Hartford, says rentals aren't going to struggle. HBJ PHOTO | STEVE LASCHEVER

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