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Chris Motl: Optimistic trends for midsize businesses in Connecticut

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With a new year and a new vaccine, there’s reason to be optimistic for the start of an economic recovery across the region in 2021.

For middle market businesses in Fairfield County, the duration of the recovery is likely to vary by industry. Sectors like distribution and logistics, real estate, communications and technology are all poised to begin to bounce back. Many will even grow, as some of the digital practices developed in remote work environments become the new way of transacting business.

Here are a few trends that bode well for middle market businesses — and recovery in the region in 2021:

Commercial real estate
booms in Connecticut
Since the onset of the pandemic, Fairfield County has experienced a steady pickup in the demand for commercial real estate, specifically from companies in New York City. Not only do areas like Stamford offer lower population density and attractive square-foot rates, but they also provide close proximity to New York, making it ideal for companies that are seeking additional space to spread out and establish satellite offices.

As a result, construction loans and financing for new office buildings, apartments and housing complexes are up along with lease rates. According to the U.S. Chamber of Commerce Commercial Construction Survey, contractors indicate that they are cautiously optimistic about their mid- to long-range prospects in the region. Eighty-five percent expressed a moderate to high level of confidence in the commercial construction market to provide new business over the next 12 months, up from 75 percent in Q2.

At the other end of the real estate market, CBRE, the world’s largest commercial real estate services firm, recently reported that leasing activity in Fairfield County totaled 374,000 square feet during Q3 2020, 174 percent greater than in Q2.

Given the long-term effects of the pandemic, expect these trends to continue well into 2021.

Uptick in acquisition activity is expected
Some companies, like data centers and communications providers, were able to thrive during the pandemic because they provide essential business services, particularly for remote work arrangements. Expect them to continue to do well into the new year as demand for improved bandwidth remains a necessity. Given the availability of low interest rates and their high cash reserves, the pandemic is likely to influence financially strong companies like these to take advantage of opportunities that will allow them to expand further and add more services by acquiring other businesses in their sectors.

Cybersecurity is more important than ever
During the early months of the pandemic, many companies figured out how to efficiently run their operations remotely by setting up digital and virtual workflows. In 2021, businesses of all sizes must make cybersecurity a priority. During the pandemic, the Information Systems Security Association International reported a 63 percent increase in cyberattacks. The growing number and sophistication of cyberattacks call for assessing your current cybersecurity practices and upgrading them, if necessary, to protect a wider range of digital business activities — from financial transactions and email to virtual meeting platforms and Wi-Fi connectivity, to name a few.

Commercial banks are 
in a position to help. Now.
The sustained and historically low-interest rate environment is expected to usher in changes to bank offerings over the next 18 months. Banks are in a position right now to help companies that need it.

The key is for business owners to remain vigilant about cash flow and expenses and to be transparent with bankers about any potential challenges to staying in the black. By keeping the lines of communication open and honest, you can strengthen relationships with your bankers and make it more likely they can intervene and offer a solution if problems arise down the line.

The pandemic disrupted many lives and livelihoods in 2020. Fortunately, 2021 should bring recovery and opportunity for area companies.

Opinions expressed are those of the author and not Webster Bank N.A. They are not intended as financial or any other professional advice. Consult a professional regarding your individual situation.

Chris Motl is executive vice president and head of commercial banking at Webster Bank. He and his team manage more than $15 billion in loans for companies across the bank’s footprint, which includes Fairfield County. He can be reached at CMotl@WebsterBank.com.

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