Hartford Business Journal

HARTFORDBUSINESS.COM | JANUARY 12, 2026 33 INDUSTRY OUTLOOK | COMMERCIAL RE AL ESTATE By Derek Kohl "U ncertainty" was the buzz- word of 2025 across a number of industries. For the architecture, engineering, devel- opment and construction industry in 2026, there will be a new theme: "cautious optimism." There is a lot to be excited about across Connecticut's commercial, industrial and resi- dential development markets, as well as in public infrastructure, though the level of opti- mism varies by sector. Borrowing costs, interest rates and construction costs appear to at least be holding steady. That stability has not been present for the last several years. And while the regulatory approval climate in Connecticut and New England remains challenging in some locations, there are major break- throughs around the state to celebrate. Mixed-use and adaptive re-use projects gain momentum Demand remains strong for large mixed-use projects that offer live- work-play environments outside major downtowns. continue to face shortages of skilled labor such as CNC fabricators, limiting companies' growth prospects. Atherton also pushed back against the idea that lenders will loosen their standards next year. "A lot of banks still don't have that capital in their deposit base, and they are turning down and not participating in what would be good, vibrant loans and projects for the future," Atherton said. "I see a little bit of a liquidity issue for the banks. That has been slowing down a lot of individual deals." The difficulty securing financing has caused some deals to fall apart, he said. Despite the challenges, Atherton said Connecticut's market still holds "incredible opportunity," especially if the state strengthens technical education pipelines. Developers active but on guard Randy Salvatore, founder and CEO of Stamford-based real estate development firm RMS Cos., said he plans to continue investing heavily in multifamily and hotel development in 2026 while closely monitoring economic conditions. Geopolitical tension and tariffs could have "a significant impact," he said. Slowing employment growth and AI-driven structural changes could weigh on the hospitality sector, Salva- tore said, though RMS's five boutique hotels have been performing well. He said 2025 proved to be as prof- itable for the company's hotels as record-setting 2024, and he expects similar results in 2026. Lower and more predictable interest rates should also benefit the company, which typically holds its properties for the long term. "I feel like we are in a good place with (interest rates) and in a good place with inflation," Salvatore said. Salvatore also said Connecticut's proximity to New York City could attract more residents and investment, citing concerns among some New Yorkers about policies under Mayor Mamdani. "I have read reports that 500,000 to 1 million people are thinking about moving out of New York because of the policies of the new mayor," Salvatore said. "If even a fraction of that happens, Connecticut is one of those destina- tions where people might come." RMS is developing major apartment projects in Hartford, New Haven, Norwalk and other communities. While absorption has slowed in New Haven amid a wave of new supply, Salvatore said he expects the market to eventu- ally absorb the new inventory. "All of the other markets are really strong," Salvatore said. EXPERT'S CORNER Cautious optimism defines CT's development outlook for 2026 Derek Kohl 2024 3,496 113 2023 3,937 145 2022 3,182 113 2021 1,483 116 2020 2,673 120 2019 3,153 121 2018 2,095 105 2017 1,912 108 2016 2,842 122 Source: U.S. Census Bureau These kinds of suburban and urban developments, such as Storrs Center in Mansfield and Blue Back Square in West Hartford, can enhance a location and create a destination by building on founda- tional elements already in place — but there are a lot of moving parts. Developers are sifting through the challenges to make headway. The Heritage Park redevelopment of the former UConn campus in West Hartford is gaining momentum at a site where other projects have failed to launch. Smaller examples, like Founders Square in Windsor, made it across the finish line last year. Other large adaptive reuse proj- ects currently in the works include mixed-use redevelopment of the Westbrook Outlets and the Crystal Mall, which was recently purchased by General Dynamics Electric Boat and is being converted into office space and training facilities. These projects will certainly be economic engines, and it's easy to imagine the Meriden and Enfield malls following with their own adaptive redevelopments, whether for medical office, health care or mixed use. In other areas of more typical retail/commercial development, adaptation and activity continues to happen, including program- matic rollouts such as quick- serve restaurants and medical office buildings. Steady activity in industrial warehouse sector The afterglow of the astronom- ical e-commerce boom of the COVID-19 era has subsided, and development of industrial ware- house projects has settled into a more realistic long-term level. Nonetheless, there is a steady flow of projects under way in this space, particularly along the I-395 corridor, near Bradley International Airport and other key strategic locations in the state. Four or five years ago, real estate costs were more reason- able and time was more valuable than money. Developers rapidly secured sites and simply pushed past any challenges that arose. Now, developers are moving ahead more selectively and doing a good amount of due diligence to make sure the sites they're looking at are strategic and reasonably priced. Constraints and challenges are identified upfront. While there are still speculative warehouse projects, there are fewer than in recent years. Public sector development ending a cycle September 2026 marks the end of the five-year infrastructure bill that authorized over a trillion dollars in trans- portation and infrastructure spending. Projects are continuing toward completion in the near term. Looking toward the end of 2026 and beyond, however, it's difficult to see how larger projects will continue without a new long-term federal infrastructure bill. In some cases there will likely be continuing authorizations extending funding for one year. While that sounds positive, the reality is that larger projects typically span three to six years. It's difficult for departments of transportation and municipalities to plan and execute long-term projects based on a one-year authorization. Coming off the longest government shutdown in history, I think it's safe to characterize the federal funding climate as dynamic. In this type of envi- ronment, public sector projects that are well researched and ready to go are best positioned to take advantage when the window of opportunity opens. Derek Kohl is vice president of oper- ations at BL Companies, an architec- ture, engineering, environmental and land surveying firm headquartered in Meriden. BUILDING PERMITS ISSUED IN PROPERTIES WITH 5 OR MORE UNITS NUMBER OF BUILDINGS WITH 5 UNITS OR MORE YEAR NEW PRIVATELY-OWNED MULTIFAMILY HOUSING UNITS AUTHORIZED IN CT

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