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Downtown New Haven Pops With Economic Vibrancy, But It Doesn't Ripple Far

City Center Oozes Economic Energy — But Retail, Office Gains Don't Ripple Very Far

By KENNETH R. GOSSELIN

January 08, 2012

What Sukh Grewal sees in New Haven now he has seen before, working in Silicon Valley in the early 1980s: a vibrancy that is making the downtown a center of technological innovation.

"It's not unlike what can happen here," said Grewal, who launched a start-up software company in downtown earlier this year after a 30-year career at General Electric. "New Haven has the lead over the state in terms of software development. We're not there in New Haven yet, but we felt we could be part of a movement."

Downtown New Haven has long possessed an enviable entertainment night life, but in recent years, the creative energy has bubbled over with the addition of hundreds of apartments, the opening of nearly a dozen of restaurants and bars in the past year alone, a thriving retail scene and remarkably low office vacancies — surprising in the face of a sluggish economic recovery.

One innovative program, for example, "Project Storefronts," targets vacant retail space with temporary stores until permanent leases are signed. And late last month, the city touted an 89-percent retail occupancy downtown, with the majority of stores locally owned, as the area headed into the final days of the holiday shopping season.

Grewal's startup is an example of a growing number of young software, biotechnology and biomedical companies in the downtown area that are growing around Yale University and Yale-New Haven Hospital — the "eds and meds" — that are at the forefront of downtown's evolution over the past 20 years.

Those institutions are providing not only jobs — Yale-New Haven's Smilow Cancer Hospital alone has added 600 jobs since it opened in 2009 — but are supplying research and a ready-made, sought-after pool of employees.

Despite the gains downtown, the vibrancy has yet to make a significant impact in the Greater New Haven area though, and crime in the city, while down overall, remains uncomfortably high.

But apartments are filling up downtown, including those that were converted from less desirable office buildings and, more recently, a new 500-unit apartment tower on State Street. The tower, opened a year ago on what was for decades a vacant lot, is now nearly 90-percent leased, on target with the developer's projections.

On the ground floor of the 360 State Street apartment tower, a full-service, co-op grocery store opened six weeks ago. The store is attracting 1,000 shoppers a day during the week, offering more than 15,000 different items

In this city of 123,000, the opening of a downtown grocery store — notoriously difficult in mid-size cities — is a coup, and residents hope the Elm City Market will attract more stores and restaurants to open in the Ninth Square district of downtown.

Some dismiss the success as all about Yale and the fact that the university steeps the city in creative energy, not to mention a steady flow of money. City officials readily acknowledge Yale's key role, but say energy is coming from other quarters as well.

"A lot of players have been here; it's not like Yale just moved here," said Kelly Murphy, the city's economic development administrator. "We're seeing momentum after years of working. What people don't notice is the 10-12 years of smaller projects, getting low level office space off the market and introducing more residential."

Office Cornerstone

In the past decade, New Haven has benefited from the growth of technology and biotechnology firms — one factor that has helped keep its overall downtown office vacancy low, at 10.2 percent as of Sept. 30, according to commercial real estate services firm Colliers International.

For Grewal, there was never any question that he would launch his new company, Grey Wall Software, in New Haven.

His wife, an immunology scientist and professor, had been recruited by Yale in 1986 — and he had worked in New Haven heading up software development projects for GE for eight years.

Grewal left GE after his unit was moved from New Haven to Shelton, and he took a group of five programmers, many of them Yale graduates, with him. He signed a lease in January, less than a week after seeing 1,600 square feet of space on the third floor of a building on Church Street overlooking the New Haven Green.

The space is spare: dry-erase paper taped to walls, with programming trees mapped out on them; two-drawer filing cabinets bought for $5 apiece from Yale and doors bought from a home improvement store for $25 and finished with stain, and polyurethane form desks. The biggest purchases were 30-inch computer monitors to make minute programming codes easier to see.

Grey Wall — a play on Grewal's name — is developing software for managing crises, giving decision-makers an overall picture of the problem, and who is doing what and where. Initial financing was private, but Connecticut Innovations — the state's quasi-public authority that invests in technology firms — has since approved funding for the venture.

"We knew we were taking a risk," Grewal said. "But we knew the talent was here. As long as we could recruit, we knew we could succeed."

The company has just nine employees right now, but recruiting has stretched as far away as Amsterdam. Grey Wall aims, of course, to grow, seeing its software as perfect for managing crises such as the one faced by Connecticut Light & Power Co. after the October snowstorm. In addition to utilities, key customers also are likely to include governments, airports and the aerospace industry.

Downtown New Haven has seen its share of corporate downsizings in recent years, and there are more on the horizon. United Illuminating, for example, will move out of nearly all the 200,000 square feet it leases on Church Street, after it finishes building a new suburban headquarters in Orange.

So far, at least, the city's expanding roster of non-profits has been moving into the office space that has been left vacant. And the city's low vacancy rate easily justifies new construction, including the planned first phase of Downtown Crossing on College Street, expected to encompass as much as 450,000 square feet of lab and office space, plus street-level retail.

The office market in downtown New Haven stands in sharp contrast to the central business district in Hartford, where overall vacancies were nearly 25 percent at the end of September.

Robert Santy, president and chief executive of Connecticut Economic Resource Center in Rocky Hill, said New Haven's downtown is dominated by smaller companies, while the foundation of Hartford's central business is built on large, mature corporations.

While that gives Hartford a solid base, it also left it open to contraction in the recession, far more so than New Haven, Santy and others say.

"Changes in the world economy don't seem to impede growth at Yale to any great extent," John Keough, a senior broker at Colliers International in New Haven, said. "They did lose money in the market crash of 2007 and 2008, but they are a very stabilizing presence in the New Haven market."

Little Spillover

Given the activity in downtown New Haven, it would seem that a ripple affect to the surrounding region would be inevitable.

But federal economic data suggests otherwise. Employment in the New Haven metro area fell nearly 8 percent since the recession began, while the production of all goods and services in roughly the same time period grew 1.5 percent.

What is startling is that by contrast, the Hartford metro area's employment fell just 1.5 percent, while output shot up 7.5 percent.

In a recent report from the Brookings Institution, a Washington, D.C-based think-tank, ranked New Haven 75th in job creation since the recession among the largest 100 metro areas in country, while Hartford ranked 14th. Similarly, New Haven ranked 43rd in output and Hartford, 2nd.

Tony Rescigno, president of the Greater New Haven Chamber of Commerce, said the employers in the broader metro area are still reluctant to hire, particularly in the manufacturing sector.

"There is still a tremendous amount of uncertainty out there." Rescigno said. "There's not a lot of hiring going on."

And the city as a whole still faces serious challenges. Violent crime — homicides, rape, robbery and assault — is down nearly 9 percent, compared with 2005. But the 34 homicides in 2011 easily surpassed the 23 in 2010.

New Haven's overall poverty rate is the second-highest among Connecticut cities.

Downtown residents acknowledge New Haven's urban troubles, but some say they are outweighed by the strides that the city has made. Murphy and others complain that reporting on crime often overshadows the gains the city is making in downtown and elsewhere in the city.

Stephanie Bennett, a North Haven chiropractor who moved into 360 State with her husband Luke a year ago, said she quickly found how much there to do within a few minutes of her apartment.

"This is the best up-and-coming city in Connecticut," Bennett said.

Market Forces

Even amid a sluggish economic recovery, New Haven has seen a flurry of new stores and restaurant openings, including the opening of an Apple store on Broadway.

Some of the retail stability is guaranteed by the Yale, which owns dozens of storefronts in and around Upper Chapel Street — giving them the clout to market multiple locations and offer competitive rents.

One stretch along Chapel between College and High streets has 19 stores, with just one vacant. The block is decidedly upscale and pricey: one shop offers a "one-of-a-kind" diamond vine right for $9,995. It also has history: the Union League Café is on the site where Revolutionary War patriot and the city's first mayor Roger Sherman once had a home.

One of the stores, Celtica, with handmade sweaters and other Celtic items, moved to the block a year ago, after operating around the corner on College Street for the previous nine years. Owner Sergio Berardelli said a store offering Celtic items, including handmade sweaters, depends on the Irish community in and around New Haven, and Yale, particularly visiting parents.

"A lot of traffic that comes is because of Yale," Berardelli said.

A 10-minute walk to the other end of Chapel lands you in the heart of the Ninth Square historic area.

When the Elm City Market opened six weeks ago, the grocery had 750 founding members. As of December, that number had jumped to 1,200 and there are forecasts for passing 2,000 in the first year. The market — a blend of organic and traditional groceries and prepared foods, many locally produced — also is approaching a pace that would result in the $10 million in sales forecast for the first year, according to Mark Regni, the store's general manager.

With the growth in the number of downtown apartments, it would seem a natural to open a grocery store. But Bruce Becker, the developer of 360 State, where the market opened in a street-level storefront, said it wasn't an easy sell.

"We reached out to 60 operators," Becker said. "They all said no."

So far, the market appears to be proving the doubters wrong, so much so that officials from Hartford are studying the co-op model as a potential alternative for Hartford's short-lived downtown grocery. The Market at Hartford 21, despite opening with fanfare, closed after just six months.

"The market is going to change the dynamic of the downtown business landscape," Regni said. "Other retailers may see that and want to open."

Across Chapel Street from the market, another initiative — a collaboration of "Project Storefronts" and the Arts Council of Greater New Haven — is seeking to carve out a niche for art space in the downtown

People hope the long-vacant building at 756 Chapel will evolve into a workspace for artists, and also play host to community events. Recently, artist David Eugene was rendering a line drawing on the wall on the third floor, the latest artist to adding to original artwork in the building.

"This has been a dream of mine for a long time," Eugene said. "Just having a wall space and a Sharpie on the wall."

Margaret Bodell, who coordinates "Project Storefronts," said the revitalization in Ninth Square is a boon for downtown, but it can't come at the expense of the art community that was long part of downtown.

"Everything is getting jazzed up in New Haven," Bodell said. "We have to keep the heart and soul of creativity in downtown."