Constitution Plaza, Hartford

It has been a long cold spell for Hartford’s office market, but there are signs that the lingering chill may finally be breaking up.

“We do have a pulse,” acknowledged James J. Stanulis, a principal with Collins Dow & Condon. “The first quarter was fairly quiet, but there are a number of developments that could improve Greater Hartford’s picture over the next six to eight months.”

Although office vacancy rates remain high, and Cushman & Wakefield reported negative absorption of nearly 500,000 square feet in the opening quarter of 2004, Stanulis said encouraging growth among small and medium-sized tenants is now being bolstered by several larger requirements circulating in the market. Meanwhile, downtown Hartford is benefiting from a series of civic and commercial investments aimed at revitalizing the community’s core.

“I think the mood is improving,” said Cushman & Wakefield Senior Director Joel Grieco. “There are a lot of things to feel good about.”

Along with projects bolstering the city’s libraries, educational facilities and museums, two long-planned commercial ventures are finally taking shape in downtown Hartford, including the $1 billion Adriaen’s Landing mixed-use complex slated to begin opening next year. Featuring more than seven acres of retail, restaurant, hotel, convention and residential space, Adriaen’s Landing is being complemented by the imminent groundbreaking of Town Square, a 34-story residential tower that will become one of Hartford’s tallest buildings upon opening in 2006. The 262-unit tower, which will seek rents from $1,400 to $2,100 per month, is being developed by Northland Investment Corp. of Newton, Mass.
Northland is one of several Bay State real estate investors who have pursued projects in Connecticut in recent years, joining such firms as the Davis Cos. and the New Boston Fund in either buying assets or carving out new structures. The latter firm has established a major presence in Hartford County, although it has placed some buildings up for sale this year, including the 600,000-square-foot 280 Trumbull Place.

Although Grieco said the swings have not been as dramatic as suffered in some markets, Hartford has seen office vacancy rates virtually double since the latest recession took hold, with Colliers registering an increase from 10.6 percent in 2000 to 19.6 percent at year end 2003. The firm has not yet completed its first quarter 2004 figures, but Stanulis said the first three months were relatively subdued, with vacancy the same or perhaps tracking slightly higher.

Cushman & Wakefield posted a 19.8 percent vacancy after the first quarter, compared to 20.0 percent at the same point in 2003. The opening salvo of 2004 did carry a red hue, with Cushman & Wakefield showing negative absorption in all six county submarkets for overall negative absorption of 483,000 square feet in the entire 25 million-square-foot office inventory.

Despite the dour numbers, Stanulis and Grieco both remain cautiously bullish about the pace of the office market in Hartford. One benefit, said Grieco, is that the region’s conservative nature kept most speculative construction under wraps long enough to prevent widespread overbuilding, such as beset the Nutmeg State in the late 1980s and early 1990s. Save for a handful of speculative buildings in Rocky Hill and Glastonbury, Connecticut’s office market has remained in check, said Stanulis, helping rental rates from plummeting precipitously.

“It’s a slow and patient approach,” Grieco said of Hartford’s business climate, with Downtown rents never growing beyond the high-$20s-per-square-foot range in the boom times.

As for tenant growth, Grieco concurred with Stanulis that small- and mid-sized tenants have been the backbone of Hartford’s office market, but a plan by the Phoenix Cos. to move hundreds of employees from Enfield to Downtown Hartford should provide an immediate boost. Elsewhere, three Connecticut agencies are joining forces to lease upwards of 240,000 square feet of space within walking distance of the Connecticut State House, said Stanulis, while the market is swirling with rumors of an unidentified 400,000-square-foot tenant seeking to come into Hartford County from out of state.

“Our activity is good,” said Stanulis, with several law firms taking advantage of lower rents to trade up to some of Hartford’s most modern properties. In one major deal in late 2003, the law firm of Shipman & Goodwin leased 100,000 square feet at One Constitution Plaza, signing a 12-year agreement. Stanulis said he is currently dealing with three serious tenants needing a total of 60,000 square feet.

Considering the market’s recent woes, Stanulis said he is encouraged by the spate of leasing prospects in Hartford. At the same time, he cautioned that landlords need not get too excited over the near term.

“We won’t see much activity for the rest of the year unless some new company comes into the market,” he said. Nonetheless, Stanulis described his outlook as “optimistic” for the recovery to continue during the next 12 months. “We’ve been through this before,” he noted.