A slightly rising vacancy rate in downtown Hartford has left Class A buildings, such as 10 State House Square, ripe for leasing by tenants requiring large amounts of office space.
While the vacancy rates for Hartford’s central business district have risen slightly in the last year, new developments in the downtown are looking to turn the city’s momentum around and create a more “energetic” environment for entrepreneurs.
“From a good news standpoint, our availability rates have increased a little bit in the last 18 months – and while we certainly saw some additional erosion in our occupied area, it’s not to the level that other markets are seeing, which you could say was a modest victory for us,” said John McCormick, executive vice president and partner at CB Richard Ellis’ Hartford office.
The vacancy rate for Hartford’s Class A space was 19.06 percent, according to a quarterly report issued by Colliers Dow & Condon. That compares to a vacancy rate of 14.79 percent in just the central business district. The entire market, including Class A, B, and C space, shows a vacancy rate of 20.59 percent.
There were two major spaces added to the sublease market that had the most impact for the first quarter. The first was the 40,000-square-foot sublease of Metro Center in the downtown. The second was the Connecticut National Gas Co.’s 20,000-square-foot opening at 10 State House Square. Both sites are actively trying to sublease.
“Those two transactions basically accounted for the negative absorption in the first quarter,” said McCormick. He explained that the city gave back approximately 85,000 square feet in the first quarter, and 60,000 of it came from those two subleases.
“Overall, the downtown market has been very quiet. There isn’t a lot of new tenant demand – not a lot of people looking for opportunities. It seems that large employers are mainly focused on backfilling projects they already own,” said McCormick. “This has been a jobless-based recovery so far, and the impact is really on the demand side. There is not a supply side problem in Hartford, and we still have 1.2 million square feet of available space that’s going to take some time to absorb.”
The three buildings that handle most of the major large-space users in the downtown are One Financial Plaza, 10 State House Square and 100 Constitution Plaza.
“Those three buildings control half of the vacant space in the market, compared to five or six years ago when there was only one building. Anyone looking for large space requirements could land there.” said McCormick. “With little demand and with a current inventory of 1.2 million square feet of Class A space, there’s clearly a supply that suggests we have an inventory that will take some time to absorb. I’m not here saying that it’s a robust market, but if 1995 was the high watermark for absorption at 26 percent availability rate, and the low was 16 percent in 2000, we’re kind of in the middle of that today.”
‘Positive Conditions’
As for the future of downtown Hartford, several new developments are looking to help boost the office market. Adriaen’s Landing, a development along the waterfront that includes a Marriott Hotel and convention center, is being built with $770 million of public money.
Near Adriaen’s Landing, Meeting House Square will eventually be a 150,000-square-foot facility with ground-floor retail space and 200 townhouse units alongside 1,150 parking spaces and a skating rink. There are two more residential projects in the downtown, the first at 55 Trumbull St., where there will be 110 housing units in the old SNET (Southern New England Telephone) property; and another at the former Cutter site, which will include a 600-car parking garage and 88 housing units.
“These are all in the stages of development and will change the streetscape of the city. There is some anticipation that in ’05 and maybe as early as ’04 we’ll really start to see some pent-up demand and some positive absorption occur,” said McCormick. “Once people start to see cranes and activity, it will hopefully coincide with positive conditions for the office market in the latter part of ’04 and into ’05. We just need to get through the next 12 months and we’ll hopefully see a market showing signs of improvement.”
According to Matt Fleury, director of marketing and communications for the Capital City Economic Development Authority, Adriaen’s Landing is one of a series of revitalization projects in which the state is involved. The 30-acre site compromises the Connecticut Convention Center and the Marriott Hotel. There also will be a dining, entertainment and residential district called Front Street.
“The whole project is part of the ongoing reconnect between downtown and the Connecticut River that was started in 1997,” said Fleury. “The landing is joined by a number of other developments, including a couple of mixed-use facilities scattered around downtown that add up to six or 700 new market rate apartments catering toward people working in our corporate offices downtown.”
One of the original goals of the state’s involvement in the area was to create a more vital environment for corporations and their employees.
“We believe the developments will support Hartford as a business market and certainly enhance the value of the commercial real estate in town,” said Fleury. “For a small city, Hartford continues to enjoy a very strong skyline and good office properties and corporate tenants.”
A goal of the developments is to make the city more competitive in order to attract corporate tenants and help businesses recruit and retain employees.
“With a combination of bringing visitors to the convention center and creating restaurants and retail, we hope to create a more energetic atmosphere that goes beyond the office day,” said Fleury, who described the Capital City Economic Development Authority as a “quasi-public authority” set up by the state to drive government-sponsored developments in Hartford.
One notable area project is the new Rentschler Field football stadium for the University of Connecticut’s new Division I Huskies, which is rapidly nearing completion for an August opening game.
“Projects like the new stadium and the expansion at Bradley Airport are part of the same elevation of the suite of attractions we can offer here,” said Fleury. “No one project stands on its own as the answer, but the comprehensiveness of these developments taken together with the follow-on entrepreneurial investments in the market will improve Hartford’s attractiveness.”
Through the years, the state has invested about $450 million in the development of the Greater Hartford area.
“That money is directly leveraging roughly $300 million from private investors, and indirectly it’s sparking reinvestment significantly in commercial real estate in [the] downtown,” he said.
Two specific areas are the ongoing renovation of Constitution Plaza by Capital Properties as well as the renovation of the Traveler’s building.
Capital Properties has spent $50 million on the property adjacent to Adriaen’s Landing for residential and recreation space. The Traveler’s Property Casualty Corp. at One Tower Square is deep in the midst of renovating its office building.
“I think that these investments speak of the developer’s confidence in a project that’s just beginning construction,” said Fleury. “This change in the city’s momentum is really exciting.”
