Hartford Business Journal

www.HartfordBusiness.com May 29, 2017 • Hartford Business Journal 5 REPORTER'S NOTEBOOK Boston Fed boss: Watch realty values closely Looking a gift horse in the mouth, so the adage goes, is an impolite act that any pru- dent recipient should avoid. But when that gift is in the form of rising residential and commercial real estate valu- ations, the president of the Federal Reserve Bank of Boston says it's not a bad idea to check its teeth, legs, hooves — the whole beast. Higher property values, particularly in Hartford, which saw its overall 2016 grand-list climb 10 percent, make it more likely for home- owners and commercial landlords, especially apartment owners, to borrow against their properties for repairs and upgrades. They also provide collateral for other realty purchases. Boston Fed Chief Eric Rosen- gren, speaking recently at a real estate risk man- agement confer- ence at New York University, sound- ed a tone of caution about the potential for economic con- ditions that cause rising realty values to reverse course. Collapsed residential and commercial real estate values were at the root of the 2008 global financial crisis that triggered the two-year Great Recession. "For almost any asset category, positive trends can sometimes evolve into prices that increase more than fundamentals justify," he said. "It is very hard to distinguish how much of the price gain is the result of the favorable fundamentals, and how much reflects an abundance of optimism by investors." As a result of Hartford's Oct. 2016 reval- uation, commercial property values in the city rose 20 percent from 2011. Many Class A office towers downtown, along with the corporate headquarters of the city's largest employers, saw their prop- erty values skyrocket by 50 percent or more. The 296,000-square-foot Metro Center at 350 Church St., for example, saw its market value double to $24.5 million last October from $12.8 million in 2011. Investment by the Capital Region Devel- opment Authority to help landlords convert former vacant office towers into apart- ments has been a key reason commercial property values have grown. That, along with the state's purchase of the former Connecticut River Plaza office tower and more businesses coming down- town, has eliminated significant empty office space, boosting Hartford's commer- cial real estate values. Rosengren said he and other financial regulators must be especially watchful of developments in the realty sector, which has benefitted from favorable "tailwinds'' such as low, stable inflation and monetary policy, including prolonged low interest rates. Connecticut and New England, some observers note, were spared the harsh real estate headwinds of a decade ago because valuations in the region didn't soar like much of the nation's. "While I do not expect that a downturn in commercial real estate prices would by itself cause a significant problem for the economy,'' Rosengren said, "in some past recessions such an occurrence has propagated an initial adverse shock — and by constraining finan- cial intermediaries, made the extent of the subsequent economic downturn more severe for a wide range of households and business- es that depend on intermediaries for credit.'' – Gregory Seay PDS has been meeting the needs of the construction industry since 1965. Our dedicated team of design and construction professionals welcomes the challenge of serving its past and future customers on their most demanding projects. Westwood Products, Inc. | Winsted, CT PDS Engineering & Construction served as General Contractor for the expansion of this industrial wood shipping product manufacturing facility. Work involved an addition onto the existing building which was a slab on grade pre-engineered steel structure. Project Features: - Five electric overhead doors - Four gas-fired unit heaters - Liner panels - Galvalume sheet metal roof - Mechanical, electrical and plumbing Project Size: 20,000 SF 107 Old Windsor Road, Bloomfield, CT 06002 (860) 242-8586 | Fax (860) 242-8587 www.pdsec.com DESIGN BUILDERS • GENERAL CONTRACTORS • CONSTRUCTION MANAGERS SPOTLIGHT ON: MANUFACTURING PDS ENGINEERING & CONSTRUCTION, INC. THINK • PLAN • BUILD Federal Reserve-Boston chief Eric Rosengren Hartford's Metro Center, 350 Church St. P H O T O S | H B J F I L E CT wages grew 5.3% in April Connecticut private-sector workers received a pay raise in April. The average weekly private-sector earn- ings in Connecticut jumped 5.3 percent last month to $1,073.01. The average number of weekly hours private-sector workers toiled also increased slightly to 33.7 hours com- pared to 33.4 hours in the year-ago period, according to the state Department of Labor. The higher wages came despite Connect- icut shedding 1,500 jobs last month, boost- ing the unemployment rate to 4.9 percent. One industry, however, continues to experience downward pressure on wages. Connecticut manufacturing workers saw their average weekly earnings fall 14.7 percent in April to $986.10 from $1,156.44 a year earlier. The manufacturing indus- try — one of the most important to Con- necticut's economy — has been experi- encing lower wages for some time, which economists attribute to shifting workforce demographics. With one of the oldest workforces in the state, manufacturing is seeing higher-paid workers retire and being replaced by newer, lower-paid workers. – Greg Bordonaro

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