December 10, 2018

Optimism helps fill more downtown Hartford office space, but economy, other factors still leave vacancies

HBJ Photo | Gregory Seay
HBJ Photo | Gregory Seay
(Top) New York landlord Adam Stark shows off the aquarium he added to his recently acquired and renovated 750 Main St. office tower in downtown Hartford. (Below) Accounting and consulting firm PwC recently renewed its lease at CityPlace I in Hartford and renovated its space to be more modern and collaborative.
Photos | Contributed
Photo | Contributed
This Constitution Plaza space is being converted into the Stanley Technology Center.
Jon Putnam, Hartford Executive Director/Broker, Cushman & Wakefield
Christopher Ostop, Hartford Managing Director/Broker, Jones Lang LaSalle LLC

Downtown Hartford office vacancy rates

4Q 2018 est. vacancy rate 15.5%

3Q 2018 vacancy rate 18%

Source: Cushman & Wakefield

New York office landlord Adam Stark is used to his metropolitan-area buildings being at or near tenant capacity. But the downtown Hartford skyscraper he bought a year ago for $4.5 million and spent more than $1 million to refurbish is well off its full-occupancy mark.

Still, Stark is confident that his 17-story, century-old skyscraper at 750 Main St., now The Stark Building, will meet his lease-up expectations in a city some see as having momentum at its back. Roughly 70 percent of his building's 102 office suites are occupied, he said.

"What we're trying to do is get the right tenants to the building,'' Stark said, " … folks looking for a long-term home.''

Stark's optimism about his newly acquired building and downtown Hartford in general mirrors sentiments shared by other center-city landlords and brokers who see Hartford as an increasingly attractive location for employers.

In fact, the central business district is getting the most tenant attention in Greater Hartford, brokers say, as the trend of companies relocating from the suburbs to downtown is still active.

Even so, there is a sizable footprint of empty space downtown as the city, region and state contend with a slow-growing economy and tenants' overall desire to occupy less office space.

Downtown's current vacancy rate for all office buildings is estimated at 15.5 percent, according to commercial realty adviser Cushman & Wakefield vs. an 18 percent vacancy level in the third quarter — the same as it was at the end of 2017. Vacancies for downtown's best office, or Class A space is estimated to be 13.7 percent.

At the end of 2017, CBRE/New England pegged downtown Hartford's office vacancy rate at 18.7 percent.

Moreover, downtown Hartford's rents are now at $20.91 a square foot — about 10.5 cents a square foot lower than the third-quarter of 2017, Cushman's data shows.

"Rents are flat at best,'' said Christopher Ostop, managing director of realty investment adviser-broker Jones Lang LaSalle LLC in Hartford.

One of the key issues blunting the center-city's leaseup is tenants' propensity to pack more workers into less office space, brokers say.

Also, the rise of co-working and other shared office spaces as well as the option to telecommute is prompting some downtown tenants to shed space almost as fast as newcomers can absorb it, brokers say.

Privately, some area office-lease brokers lament the rise in tenant concessions, such as discounted rents and greater allowances for space improvements and upgrades. In addition, they say the high cost of parking — accounting for as much as $7 a square foot of the office rent — remains a barrier for many prospective tenants.

Downtown attraction

A downtown Hartford office lease, said senior broker Jon Putnam, an executive director at Cushman & Wakefield in Hartford, "has become more attractive to companies than it used to be.'' A major reason, Putnam said, is employers are eager to tap downtown's workday, nightlife and cultural amenities to attract and retain young Millennials, especially as Baby Boomers and other older workers exit the workforce at an increasing rate.

A recent spate of new tenant deals in some of downtown Hartford's signature office buildings bear that out.

In June, New York adviser Global Atlantic Financial Group relocated its suburban Simsbury office and 85 workers to downtown Hartford's Gold Building/One Financial Plaza. In October, information-technology and outsourcing vendor Infosys chose more than 56,000 square feet in the Goodwin Square office tower, 225 Asylum St., for its regional technology hub.

Nearby, on the second floor of downtown's One Constitution Plaza, New Britain hand- and power-tool maker Stanley Black & Decker is putting finishing touches on 23,000 square feet for its pilot Stanley Technology Center. There, dozens of aspiring techpreneurs plus scores of Stanley engineers work to develop the next generation of innovative processes and products.

Meantime, other key downtown employers reaffirmed their commitment to the city.

Virtus Investment Partners signed a lease for about 65,000 square feet at the Gold Building, including the top two floors that once served as United Technologies Corp.'s corporate offices. Also, accounting and consulting firm PwC renewed its lease for about 46,000 square feet at CityPlace I.

All that activity is on top of UConn's relocation in fall 2017 of its former West Hartford campus to downtown, in the former Hartford Times Building on Prospect Street.

In recent years, the state and city have made considerable strides and investments to beef up downtown. New attractions have included Dunkin' Donuts Park, the Hartford Rail Line train service to New Haven and Springfield, a livelier Front Street entertainment district and a soon-to-open renovated Dillon Stadium, as well as hundreds of new apartment units downtown.

Two more older office building-to-apartments/condominiums conversions — the 64-unit Teachers Village at 370 Asylum St. and eight-unit The Hartford Lofts condos, 289 Asylum St. — emerged recently as downtown housing options. And one of the city's most significant downtown housing projects in recent years — conversion of the long-vacant office towers at 101-111 Pearl Street — will add another 258 units when completed in 2019.

"We need more companies to decide on their own," Ostop said, "that Connecticut and Hartford is a good place to do business, and elect to move here."

Aquarium amenity

To lure tenants to his buildings, Stark says he finds they covet amenities, like fitness centers, cafeterias, "quiet'' rooms and open areas, to huddle with fellow workers or clients.

One peculiar amenity found in many of Stark's office buildings is an aquarium like the one installed at the main entry desk at 750 Main. Stark says since he installed one in his earliest office acquisitions, he has gotten plaudits from tenants who consider it a refreshing decor addition.

Stark, president of Stark Office Suites and a former Wall Street mergers and acquisitions adviser who professes an abiding interest in older buildings, is among numerous New York investors who have bought downtown properties in recent years because they see it as an up-and-coming and more affordable market.

Other renovations he's put into the building include upgrading its mechanical systems, interior lighting, fiber-optic network and a new lobby, among others.

He is looking for tenants who want a smaller footprint and a longer-term lease. Meantime, he said he is narrowing his search for a tenant to occupy the former CVS retail-store space fronting the State Street side of the tower.

Hartford architect William Crosskey II relocated to 750 Main in Aug. 2016, doubling the 4,000 square feet of office space he and his 25 staffers in Crosskey Architect's had at downtown's Union Station, "where we were bursting at the seams,'' he said.

"It's been a real plus having Adam buy the building,'' Crosskey said. " … We're really glad about the open feel of the space.''

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