Office vacancy rates in both Greater Hartford and Fairfield County linger in the mid-20-percent range as companies shrink space footprints when their lease expirations come due. Downtown Stamford was Fairfield County’s busiest submarket, including a pair of leases at 400 Atlantic Ave. Courtesy photo

Office tenants’ slimmed-down space requirements continue to temper leasing demand within Connecticut’s major office markets, keeping vacancy rates elevated and favoring high-end properties.

The Hartford market vacancy rate hit 25.1 percent in the second quarter, Cushman & Wakefield reported, while CBRE said Fairfield County’s office market ended the quarter with a 26.2 percent vacancy rate.

In both markets, leasing activity remains sluggish and asking rents are relatively flat.

But a Hartford-based commercial real estate broker said office tenants are showing signs of making longer-term lease commitments, removing some uncertainty from landlords’ outlook.

“Right after COVID, there was still a lot of hand-wringing about what the future looked like and how much of a commitment companies wanted to make,” said Joel Greico, executive director at Cushman & Wakefield. “Now, companies are putting COVID in their rear view and they’re OK committing to a new 5, 7 and 10-year lease.”

As companies reassess their post-pandemic space needs, most are taking 30 to 40 percent less square-footage than their previous leases, Greico said.

Hartford’s 7.2 million-square-foot central business district continues to struggle, recording nearly 97,000 square feet of negative absorption during the second quarter and ending the quarter with a 29.3-percent vacancy rate. The downtown market now has nearly 350,000 square feet of sublease listings, accounting for 44 percent of the metro area’s total.

In the Hartford metro, office tenants’ preference for walkable, amenitized properties and neighborhoods favors submarkets such as West Hartford Center, Greico noted. The 6.3 million-square-foot western submarket accounted for the majority of the region’s leasing activity for the second consecutive quarter, according to Cushman & Wakefield data, but still had nearly 150,000 square feet of negative absorption during the quarter and a 22.3-percent vacancy rate.

Fairfield County Market Heads South

Macroeconomic headwinds depressed leasing activity as Fairfield County’s office availability rate increased 0.7 percent to 27.4 percent in the second quarter, according to CBRE.

The 40.4-million-square-foot market had nearly 250,000 square feet of negative absorption, while average asking rents remained flat at $35.71 per square foot.

Only downtown Stamford’s submarket bucked the negative trend, recording 196,000 square feet of leases. An undisclosed insurer and Cara Therapeutics leased 97,359 square feet and 26,374 square feet, respectively, at 400 Atlantic St., while Northern Trust Corp. committed to 24,361 square feet at 300 Atlantic St. But all three transactions represented relocations within Stamford that reduced the companies’ footprints.

Office landlords with the financial ability to invest in capital improvements are getting the best traction in leasing activity, CBRE reported, amid the continuing contraction of corporate space requirements.