🔒Scannell’s ‘spec’ investment bet in Cromwell

On acreage barely visible from I-91 North, near Exit 23/West St. in Cromwell, construction workers are putting the finishing interior-exterior touches on a real estate development rarely seen these days in Greater Hartford’s commercial-industrial market.

Next door to the town’s Transfer Station, Indiana developer Scannell Properties has erected a 403,000-square-foot, gray-hued masonry shell to house occupants’ warehouse-distribution operations in its County Line Industrial Park, 120 County Line Drive.

What separates this mammoth structure longer than several football fields from similar properties being developed or recently built in Windsor, Bloomfield and East Granby is that it was erected with no firm leases in hand.

That kind of “speculative’’ development all but disappeared from Greater Hartford’s commercial real estate market after the 2008 financial crisis triggered the Great Recession.

For several years after, new commercial-industrial construction nearly grounded to a halt. What construction that did occur was done only after developer-landlords had firm leasing commitments in hand for the space they were building, often a requirement for obtaining bank or investor financing.

The appearance of spec developments, whether commercial or residential, typically are taken as signs of improving sales and leasing conditions in the realty market.

Cromwell has at least five other commercial developments totaling more than 139,000 square feet under construction or nearing completion, with a stated construction value of $15 million, town records show.

All had a tenant, or in one case, a property owner, in hand before work began.

Scannell Properties, the Indianapolis-based commercial developer with real estate spread across much of America and parts of Canada, spent $12.8 million to erect the building’s shell, said Cromwell’s director of planning and development Stuart Popper.

However, some industrial realty brokers say Scannell has had some difficulty finding takers for its Cromwell property.

Contrary to street talk, Popper says he has been contacted by parties indicating interest in leasing part of the building. Scannell is the same developer contracted last year to build a $42.4 million Coca-Cola distribution facility in South Windsor.

CBRE New England broker Christopher Metcalfe, Scannell’s lease broker, confirms plenty of tenant interest in the Cromwell site, though he says no leases have yet been signed. He described County Line Industrial Park as the largest spec industrial building ever erected in Connecticut “by a factor of two.’’

It will be ready for lease-up by summer, he said.

Daniel Madrigal, Scannell’s development manager in charge of its New England portfolio, said tenant interest has accelerated as the building nears completion.

Because it is spec, Madrigal said some prospects preferred to check out the property before committing.

“We certainly wish it was leased now,’’ he said, adding, “ … We’re on track on where we’d thought we’d be.’’

Mark Duclos, managing principal for Hartford broker Sentry Commercial, said even some non-spec industrial spaces are sitting unleased.

Duclos, who recently moderated a panel discussion in Wallingford hosted by the Society of Industrial and Commercial Realtors Connecticut/Western Massachusetts chapter, offered his assessment of what, at the moment, may be plaguing Scannell and other landlords of industrial space, which has been among the hottest real estate classes in Connecticut in recent years.

“I think the slower-than-expected lease-up, at least in part, has something to do with the velocity of the large warehouse market slowing a bit,’’ Duclos said. “The other challenge is that logistics and e-commerce needs many times are very specific and if the property doesn’t meet the specific needs of the prospective tenant then they will wait for something else or build it.”