E-commerce is changing the way CT does business

Photo of Luther Turmelle

It’s all about the e-commerce.

While much of the public’s focus when it comes to commercial real estate is on who is getting or losing corporate headquarters,

the state is quietly becoming a very attractive location for warehouses and distribution centers.

The warehouses and distribution centers are popping up all over the state, driven by the growth in e-commerce. Among examples are major projects in North Haven, Middletown and Cromwell, and state and local political leaders are realizing the warehousing and distribution economy has a key advantage over landing a headquarters.

Headquarters may come and go, but in the warehousing and distribution sector, it’s location, location, location. And few states in the Northeast — with the possible exception of New Jersey — are in an advantageous geographic position as Connecticut.

“Connecticut is beginning to realize that we’re between two economic powerhouses,” North Haven First Selectman Mike Freida said, referring to Boston and New York.

Driving change

Christopher Metcalfe|, first vice president with CBRE/New England, an industrial real estate broker, said Connecticut “is one of the few places that you can distribute into both New York and Boston from.”

The manageable driving distance into both cities is critical, Metcalfe said, because there is a shortage of drivers in the trucking industry.

“It’s a real problem, very challenging,” he said.

Joe Scully, president of the Connecticut Motor Transport Association, said that as the truck drivers from the Baby Boom generation age, the industry is shifting from long haul routes, in which truckers are on the road for days at a time, to shorter trips.

“It’s one way to attract younger drivers and it helps that retailers are shifting to a decentralized business model, Scully said. “Things are just changing and both the truck drivers and business owners are already addressing that change.”

An October 2017 report from the New York City-based data firm Trepp said “retailers are eschewing efforts to keep physical storefront open and focusing on last-mile delivery via e-commerce channels.”

“The industrial (real estate) sector benefits greatly from this market shift as demand for warehouses, flex spaces and other property subtypes has surged,” the Trepp report says in part.

Market matters

E-commerce retail sales as a percentage of all sales nationally was 6 percent at the end of 2014, Metcalfe said. By the end of 2017, it had grown to 9 percent, he said.

“All that stuff has to be stored, sorted and delivered from somewhere,” Metcalfe said.

The demand for warehouse space is outpacing the availability of it, according to a CBRE report. Demand for warehouse space at the national level was 6.2 million square feet greater than supply in the fourth quarter of 2018, the report said.

Though Connecticut is not considered one of the top 10 markets for warehousing and distribution activity, projects here point to the sector heating up.

Currently under construction in Cromwell is a 403,000-square-foot warehouse being built on speculation, with no tenant already in place, Metcalfe|,said. The project is being developed by Indiana-based developer Scannell Properties and is being marketed by CBRE/New England..

“There are few prospects looking at the building right now,” he said. “Once you get a tenant, it takes a while to build out the inside. But I’m sure that the building will be fully operational.”

The willingness to build warehouse space on spec “shows that smart investment money is seeing an economic advantage in this being built,” he said.

“We’re seeing a tremendous demand for these types of buildings,” Metcalfe said.

Cromwell Town Manager Anthony Salvatore said the Scannell Properties project has the potential “to be a catalyst to generate additional usage out there.”

The property being developed is to the west of Shunpike Road, also know as Route 3, Salvatore said, There are about 300 acres east of Shunpike Road that could be developed if there were enough interest, he said.

Other evidence the warehousing market is heating up in Connecticut, Metcalfe said, is the opening of a 600,000-square-foot distribution center for FedEx Ground on the site of a former Aetna corporate complex off Middle Street in Middletown.

The Aetna buildings on the 204-acre property were demolished in 2011, a few years after the insurance giant left the complex. FedEx Ground bought the property from Aetna for $18 million in 2016.

New construction, like what was done for FedEx Ground, is considered by many businesses to be preferable to trying to retrofit an existing building, according to Metcalfe.

“These users want to design the buildings to their needs and exact specifications,” he said. “In the end, it’s more cost effective for them and works out better.”

Jeff Pugliese, vice president of the Middlesex Chamber of Commerce, said that if the FedEx Ground warehouse in Middletown is successful, it might lead to other warehousing opportunities for other communities in the county. The FedEx Ground facility is located of Interstate 91 near the city’s border with Cromwell.

“It might not be a fit for some of our down county communities, which are more traditional New England small towns,” Pugliese said. “But we certainly have the infrastructure for it and we’re right in the central part of the state.”


There is less warehouse and distribution activity in Fairfield County, Metcalfe said with most of its focused in Stratford and Bridgeport.

“There are pockets here and there elsewhere in Fairfield County, but outside of those two areas, the focus is more on residential and office development,” he said.

But according to Ed Lavernoich, president of Bridgeport Economic Development Corp., there are a number of factors that make the state’s largest city less than ideal for warehouses and distribution center. The Bridgeport Economic Development Corp. is an affiliate of the Bridgeport Regional Business Council and as a non-profit corporate entity has the authority to undertake and manage development projects, borrow money and issue bonds among other things.

Lavernoich was with the city’s economic development office for 26 years and he said Bridgeport officials would be contacted several times a year by business interests asking if there was available space for warehouses and distribution centers close to Interstate 95 and Route 8.

“To develop a project like that, you need a minimum of 15 to 25 acres and that’s hard to come by in a city that is as densely populated as Bridgeport,” Lavernoich said. “I’d say the population density is roughly 8,500 people per square mile. The further you get away from the highways, the closer you come to encroaching on residential neighborhoods that are going to oppose 25-to 30 large trucks per day coming through their neighborhood.”

Developing any land along the railroad tracks that cut through the city comes with its own set of problems, he said.

“There are only about seven or eight railroad underpasses in the city that can accommodate tractor trailers with high tops,” Lavernoich said. “When I was with the city, we were working on developing the West End and it took moving heaven and earth just to piece together 15 acres and that wasn’t right along I-95.”

Bill Purcell, president of the Shelton-based Greater Valley Chamber of Commerce, said the city is host to a number of businesses that want a presence in Fairfield County, not just for corporate headquarters, but warehouse operations as well. Those businesses include BTX Global Logistics and Inline Plastics, Purcell said.

“The Valley is an ideal location along the Route 8 corridor, with easy access to Interstates I-95 and I-84,” Purcell said.

North Haven is perhaps the best recent illustration of how an attractive location — combined with a willingness by local officials to work with developers — can benefit a local economy.

E-commerce giant Amazon will open a 1.2 million square foot, $250 million warehouse on the site of a former Pratt & Whitney plant off Washington Avenue. The warehouse is expected to add 1,800 jobs to the local economy initially, with employment levels expanding to 3,000 over time.

Freida said the economic development power of a warehouse of that size shouldn’t be underestimated.

“They tend to be an economic development multiplier,” he said. “Plazas near the Amazon site are being redeveloped and property vacancies are being filled because the businesses that go in there want to serve the employees that will be coming to work there.”

North Haven has had more success attracting warehousing operations than many other New Haven-area communities, though the town’s good fortune in attracting warehousing operations began in the aftermath of a setback.

Stop & Shop announced in 2006 that it closing its warehouse off Interstate 91’s Exit 9. But about four years later, town officials were able to convince Cheshire-based grocery distributor Bozzuto’s to open a warehouse there.

Existing warehouse space in North Haven has also proved to be an attractive draw.

Massachusetts-based Calare Properties, which frequently invests in warehouse properties across the Northeast, purchased a 175,000-square-foot warehouse at 33 Stiles Lane at the start of last year for $10.5 million. Calare officials were then able to convince chemical additives maker BYK USA to expand into some of the space in that warehouse, Freida said.

BYK, which has a facility in Wallingford, added 100 new jobs as a result of the expansion, he said.

Connecticut has proven to be an attractive warehousing market for Calare. In addition to the North Haven warehouse and another located on Pepe’s Farms Road in Milford, Calare has sought to develop two new warehouses on the same site in Wallingford.

Last year, Calare officials proposed converting the sprawling former corporate campus of Bristol-Myers Squib into a pair of large warehouses. But that proved a tough sell to Wallingford residents, though it is in a zone along Interstate 91 near Exit 15 that was specifically designed for warehousing and industrial use.

The Wallingford Planning and Zoning Commission rejected Calare’s plan late last year. Jim Manley, Calare’s vice president of economic development, said company officials are weighing the next move in terms of developing the property.

“We’re trying to find a way to make this work,” Manley said.. “This is the best location on the I-91 corridor, better than the one in North Haven (where Amazon is building) because of direct access to the highway. I’m confident we’ll come to some sort of an agreement.”

But even as company officials are formulating plans for the property, Calare is moving ahead with plans to demolish the former research and development center and other buildings on the property, Manley said.

Company officials are working to obtain necessary permits from the town to tear down the buildings. If all goes according to plan, the demolition will start in about a month, Manley said.

Wallingford Economic Development Chairman Joe Mirra said he is hopeful Calare will submit a new plan to develop the property. He said once the former pharmaceutical research facility is torn down, “our tax revenues are going to take a big hit.”

The town’s reputation in the business community could take an even bigger hit, Mirra said,

“My concern with this is if we aren’t able to reach some kind of deal, businesses that might be considering coming here will now have to take pause and ask whether we are an attractive community,” he said. “I seriously doubt that you will find somebody who wants to build an office complex there. People have to understand where we are in the world today.”

Mayor William Dickinson Jr. said in late January that town officials have estimated that one-third of the office space in Wallingford currently is vacant.