Hartford Business Journal

14 Hartford Business Journal • July 15, 2019 • www.HartfordBusiness.com SPECIAL REPORT: CITIES PROJECT at San Francisco-based transportation planning firm Nelson/Nygaard. In an attempt to offer the same conveniences of the suburbs, cities across the country took steps to become more car-friendly, with many decimating their cityscapes. Those moves ultimately proved ill- conceived and disastrous, Tumlin said. "There are so many case stud- ies of vibrant cities that completely destroyed their economic future by trying to suburbanize themselves," Tumlin said. "The suburbs are always going to be able to compete for people who want suburbia; downtowns need to compete on their own strengths." Taxing land While some say Hartford would be better off with less parking, figuring out how to fill empty lots is complicated. In 2016, Hartford City Councilor John Gale advocated for a land value tax to encourage development. The idea was to make taxes on land high enough to severely reduce the profit- ability of parking lots. "The goal of this is to discourage land banking," Gale said. "[The tax would] flip taxation on its head, and say that it's the land that has the value, and so we're going to tax the land at a certain tax rate, and then the building that you put on it, we'll tax at a lower rate." Gale dropped the idea amid push- back from parking-lot owners and others who said the new tax structure wouldn't spark development, but he's still critical of major Hartford-based property owners sitting on vacant land. "[They're] not willing to risk money in their hometown," Gale said. Philip, the city assessor, said he's skeptical a land value tax would achieve Gale's intended aim. "You need demand if you are going to go out and develop parking lots, and that is why I've always personally been suspicious of a land value tax," Philip said. "I don't see that spurring devel- opment. If demand is there it will be developed. If it isn't, it won't." At the same time, ground-up devel- opment in Hartford is largely a losing proposition right now because rents for commercial or residential units aren't high enough to cover the cost of construction, according to Michael Fre- imuth, executive director of the Capital Region Development Authority (CRDA), a quasi-public development agency. Most major new developments that do happen in the city require significant public subsidies or tax breaks, in addition to other funding sources like tax credits, said Freimuth, whose organization has invested close to $100 million of bonded state taxpayer money in recent years to help finance construction of more than 1,500 apartment units downtown. He's currently involved in a few proposed ground-up developments. One, in Hartford's Downtown North neighborhood in the shadow of Dunkin' Donuts Park, aims to convert parking- lot space into a mixed-use project. The first phase, to be developed by Stamford-based RMS Cos., calls for a $46 million investment at 1212 Main St., which will include a 200,000-square- foot mixed-use building contain- ing 200 living units, plus 11,000 square feet of retail and 259 parking spaces. CRDA has pledged $12 mil- lion toward the de- velopment's first phase, which is currently on hold until the city can settle a legal dispute with a former developer. The other project is a long-awaited 108-unit apartment and retail develop- ment on 13 acres of vacant city-owned land at the corner of Park and Main streets. South Norwalk-based Spinnaker Real Estate Partners and Hartford's Free- man Cos. are the developers of that proj- ect, which will include 125 parking spaces and an $8.5 million loan from CRDA. Without CRDA funding, both proj- ects likely wouldn't be possible. Freimuth is also involved with the two new parking garage projects near The Bushnell, which he said will actually benefit the city's development ambi- tions by consolidating parking used by a variety of people — state workers, Bushnell patrons, visitors to state courts and offices, etc. — and then freeing up nearby surface lots that can be used for a planned mixed-use development. It's tough to say if the city has too much parking, Freimuth added. "There's always a greater concern than a reality when it comes to park- ing," he said. "It generally boils down to where and at what price." With few ex- ceptions (Bos- ton, New York, Chicago, San Francisco), most cities of any size will need parking, Freimuth said. "It's how best to manage and optimize it," he said. Is there demand? Freimuth and Putnam, the commer- cial realty broker, agree that demand for retail and office developments is weak in Hartford. Putnam estimates that market conditions required for a new office building won't exist for at least another decade. The last time someone proposed a new office tower downtown was in 2008, when entrepreneur Abul Islam, CEO and founder of AI Engineers Inc., unveiled plans for a 13-story, $40 million high-rise to house his Middletown-based engi- neering firm and other tenants, as well as retail space. He even paid to knock down the former Broadcast House, a '60s-era structure that was the former studio-offices for WFSB Channel 3, to make room for his building. Realty experts at the time said the tower would never get built. They were right. Not only was the timing bad — at the start of the Great Recession, which wreaked havoc on commercial real es- tate downtown — but the office vacancy rate and cost of construction were too high for the project to make sense. Islam pivoted at one point and proposed to build a new residential building instead, but the project never materialized. That space remains a vacant lot. The office vacancy rate for Class A office space downtown is currently 17.7 percent, which is still high and signals there's not enough demand for more space, commercial brokers say. Demand for residential units down- town is stronger, but again, the city's high costs limit ground-up develop- ment, so it's difficult to envision a sig- nificant number of new shiny apartment towers filling parking-lot space in the near term. (Apartment rents for CRDA projects are currently about $2.50 per square foot vs. $4 a square foot needed to support ground-up development.) Most CRDA-backed apartment projects that have come online so far converted old, existing office buildings into rent- able, mostly market-rate living units. Removing parking requirements from Hartford's zoning code is a developer-friendly step, Putnam said, but it's not nearly enough to start a development wave. "I haven't seen anyone put up a tower or a new building from scratch without getting some kind of subsidy," Putnam said. "It's pie in the sky until you get a financially sustainable model." Hartford comparisons In his research, Garrick, the UConn professor, found several cities with populations and land areas similar to Hartford that have significantly re- duced surface parking in the past few decades. And while they don't make for perfect apples-to-apples comparisons, their stories are still relevant. Between 1960 and 2000, Arlington, Va., a Washington D.C. suburb, shrank its ratio of off-street parking to build- ing area by 52 percent, according to one of Garrick's studies. Cambridge, Mass.' ratio went down by 5 percent during that same time period, while A focus on better managing parking M anaged parking, which aims to make the greatest use out of the fewest parking spots as possible, appears to be the wave of the future, according to Michael Fre- imuth, executive director of the Capital Region Development Authority. CRDA plans to use the managed- parking concept for a parking garage being developed near The Bushnell that will potentially make room for a mixed-use development across the street. Parking spots in the planned Clinton Street garage will likely be occupied by customers during the day, and residents at night, rather than having separate lots for each. "That's where we're headed," Fre- imuth said. "Ultimately that translates to less construction of parking, and a better pricing mechanism for it; when you're getting a better revenue stream, you can bring your prices down." The CRDA's Bushnell project involves knocking down a build- ing — at the location of the former Connecticut Department of Public Health Laboratory — to make way for a parking garage. That garage will provide parking for people who currently park on two surface lots that will be developed into a mix of residential and commercial uses. — Sean Teehan >> Filling Empty Spaces continued Developers have proposed a ground-up 108-unit apartment and retail development on vacant lots at the corner of Main and Park streets in downtown Hartford. RENDERING | CONTRIBUTED John Gale, Hartford City Councilor Michael Freimuth, Executive Director, Capital Region Development Authority (CRDA)

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