The Greater Hartford office market has enjoyed success in recent months. In July, Colliers Dow & Condon represented Grunberg Realty in the $19.64 million purchase of Glastonbury Corporate Center, Buildings 2-4, from Lincoln Property Co.
Downtown Hartford’s largest lease transaction in 10 years energized the area’s office market in the third quarter of 2006, and commercial real estate brokers say they are optimistic about the rest of this year and the year to come.
Travelers Indemnity Co. signed a lease expansion in August for a total of 391,000 square feet at State House Square. At the time of the lease, it lowered the Class A vacancy rate in the city’s central business district to 13.2 percent from 18.6 percent, according to CB Richard Ellis.
That news was followed by an announcement that St. Paul Travelers recommitted to Hartford with a new 87,220-square-foot lease at One Financial Plaza.
Those deals helped the Class A vacancy rate fall to less than 13 percent, according to Colliers Dow & Condon, but much of the market activity was dominated by 3,000- to 10,000-square-foot leases.
“That’s where a lot of the action is,” said Jim Stanulis, principal at Colliers Dow & Condon in Hartford.
According to Colliers Dow & Condon, each of the four suburban markets in Greater Hartford and Hartford’s central business district saw Class A vacancy rates improve at the end of the third quarter. Through the first three quarters of this year, the central business district absorbed just over 415,000 square feet of space. The suburbs absorbed over 478,000 square feet during the same period. That was nearly as much as was absorbed during all of 2005.
Class A vacancy for all of the market sectors dropped 3 basis points from the end of 2005, when it closed at 15.85 percent, to the end of the third quarter of this year, when it closed at 12.89 percent.
Much of the activity has been in the finance, health, insurance and real estate sectors, Stanulis said.
“I’m encouraged by it all,” he said.
‘Pretty Good’
Class B buildings in Greater Hartford did not fare as well. The Class B vacancy rate for the end of the third quarter was 22.62 percent, according to CB Richard Ellis, a statistic that brought the overall vacancy rate in Greater Hartford up to 16.64 percent.
All classes of buildings in the suburban markets fared well, with a vacancy rate of 13.64 percent.
The only market that faltered was the north suburban office market, Livingston said. The vacancy rate there was 25.28 percent at the end of the third quarter, while the vacancy rates in the other suburban markets hovered around 10 percent.
Despite the active quarter, the vacancy rate ended up slightly higher than last quarter, according to Jeff Livingston, managing director of CB Richard Ellis in Hartford. But that increase, he noted, was partly due to an owner-occupied building – which had not previously been included in the firm’s numbers – being sold.
“All things considered, we had a pretty good third quarter,” Livingston said. He added that he expects to see some upward pressure on rental rates, a trend Stanulis said he also is noticing.
Weighted average rental rates for Class A offices were $23.50 for Hartford’s central business district, and $21.25 for suburban offices at the end of the third quarter, according to Colliers Dow & Condon. The firm also estimated that operating expenses, including property taxes, for buildings in the central business district averaged $10 per square foot, while the average operating expenses of suburban buildings cost around $8 per square foot. Stanulis said he expects rental rates to go up by 1 percent to 5 percent during the fourth quarter and into next year, but he noted that rent-waiver concessions are still common.
Colliers Dow & Condon, in its quarterly report, noted that it is still a tenant’s market, but that some sectors are improving.
“Overall, there is an optimism from office users about hiring, expansion and growth,” according to the report.
Greater Hartford’s sublease market has shrunk considerably to below 300,000 square feet from a high of 1.2 million square feet in June 2003. Sublease space now represents 1.27 percent of total inventory, and 7.73 of available space.
Class A office sales during the first three quarters of 2006 varied between $84 per square foot and $180 per square foot, with cap rates between 7 percent and 9 percent, according to Colliers Dow & Condon.
Colliers Dow & Condon represented Grunberg Realty in July in the $19.65 million purchase of Glastonbury Corporate Center, Buildings 2-4. The seller was Lincoln Property Co.
Class A properties totaled more than 171,000 square feet and are considered trophy properties within the suburban Hartford market, according to Colliers Dow & Condon. At the time of sale the building was 85 percent leased. Tenants include MetLife, Dinex and other national and regional tenants.
