Travelers Indemnity Co.’s expansion to a total of 391,000 square feet at State House Square is the largest lease transaction in Hartford’s central business district in 10 years.
Improvements abound in Hartford’s downtown as the city, the state and private developers invest in new apartment buildings, hotels and retail space. But it’s been awhile since the commercial brokers who make their living by leasing office space had a reason to break out the bubbly.
That changed in the third quarter of this year when two companies announced that Hartford was where they wanted to be. Aetna Inc. in late July announced it will make a capital investment of about $219 million to improve its Hartford campus over the next several years, and that it will consolidate most of its Middletown-based employees into the Rogers and Tower buildings in the city.
That announcement was followed by last week’s news that The Travelers Indemnity Co. has signed a lease expansion for a total of 391,000 square feet at State House Square – the largest lease transaction in Hartford’s central business district in 10 years.
“Any time you absorb space in this market, it’s like manna from heaven,” said Jim Stanulis, principal at Colliers Dow & Condon in Hartford. “We’re encouraged by it.”
The market showed steady improvement over the past several quarters, according to Colliers Dow & Condon. Vacancy rates in the central business steadily dropped over the first six months of this year, going from 20.62 percent in 2005 to 19.78 percent in the first quarter of 2006, and dropping further to 16.56 percent at the end of the second quarter.
But the market has not seen announcements of this magnitude for some time, Stanulis said. Hartford’s office market has had bad luck and bad press. With the city’s revitalization, and with the vision of more feet on the street starting to become a reality, now is Hartford’s “time to shine,” Stanulis said.
“It’s a message we continue to send,” he said.
The Travelers deal lowers the Class A vacancy rate in the CBD to 13.2 percent from 18.6 percent, according to CB Richard Ellis.
“[The vacancy rate drop] is huge,” said John McCormick, executive vice president and partner at CB Richard Ellis in Hartford. The deal also lowered available sublease space in the market.
It is significant that Travelers made such a commitment to Hartford, said Shawn McMahon, vice president of Jones Lang LaSalle in Hartford, who brokered the deal.
“I think the credit deserves to go to Travelers, [which continues] to grow and prosper in Hartford,” he said. “It’s a great thing for the city of Hartford.”
The lease deal could have an effect on rental rates, since currently more than 60 percent of available Class A space is on the 10th floor or below, McCormick said. There are fewer opportunities for large tenants who need large blocks of space, and who want the cache of the upper floors, so that could mean better pricing for the landlords of downtown Class A space.
The good news was further strengthened by the announcement that the hedge fund GlobeOp Financial Services has signed a lease for 20,000 square feet in Goodwin Square and will take advantage of the state’s new Job Creation Tax Credit and Displaced Worker Tax Credit programs, according to The Hartford Courant.
‘Blue-Chip Firms’
Travelers renewed 181,000 square feet and expanded by 210,000 square feet in State House Square, which brings the building’s occupancy to 96 percent. The lease carries a term of 10 years and six months.
“The expansion of Travelers solidifies State House Square as the premier Class A building in the Hartford central business district,” said Jordan Slone, chairman and chief executive officer of Harbor Group International – the Norfolk, Va.-based owner of the building – in a prepared statement. “Our building is now almost completely occupied, and with blue-chip firms.”
Jones Lang LaSalle was the leasing agent, but phone calls to the firm were not returned by deadline.
“We are thrilled that The Travelers Indemnity Co. has chosen to dramatically expand their presence here at State House Square,” said David Jakubowski, general manager of State House Square, in a prepared statement. “We firmly believe we offer Hartford’s most desirable office environment in terms of location, quality, service and amenities. Having a tenant of Travelers’ caliber opt to make its home here with us is strong confirmation.”
Aetna’s announcement came on July 28. The company made the decision after ING left the Tower building, and after Aetna did a strategic assessment of the company’s facilities needs in Connecticut.
The state Department of Economic and Community Development is working with the company to provide financial incentives to support the project. The city of Hartford also has entered into an agreement to sell Aetna tax liens on certain city parcels on Laurel and Hawthorne streets, and has entered into several long-term lease agreements on existing surface parking lots to accommodate the company’s parking needs.
“Everyone wins when Connecticut and our business community join forces,” Gov. M. Jodi Rell said in a prepared statement. “My administration has made it a top priority to attract and retain a strong base of companies like Aetna that provide jobs and economic vitality to the region. Aetna and Connecticut have worked together for generations. This is one of Connecticut’s oldest, largest, most well-known and well-respected companies, and I am delighted that Aetna is extending its long-term commitment to the state. Not only will good-paying jobs be retained and added in Hartford, but the projects Aetna is undertaking will provide new construction work as well. I look forward to the company’s continued expansion in our state in the years to come.”
As part of the agreement, Aetna has committed to maintain a minimum of 7,000 employees in Connecticut for the next five years.
Most of the employees the company will relocate to Hartford will be moved from Aetna’s Middletown facility. The relocation will take place gradually beginning in 2009 and accelerate as Aetna’s lease in Middletown expires in 2010 and the Hartford facilities are refitted to accommodate the increase. Aetna intends to maintain its Data Center in Middletown with 150 to 200 employees beyond 2010.
“Aetna has had a long and very successful relationship with the state of Connecticut and the city of Hartford over the years, and we are very pleased to announce that Hartford will once again be the center of our business operations,” said Ronald A. Williams, chief executive officer and president of Aetna, in a prepared statement. “This decision makes the best business sense for Aetna.” He added that Hartford has been Aetna’s headquarters since the company’s founding in 1853.
