Hartford Business Journal

10 Hartford Business Journal • February 24, 2020 • www.HartfordBusiness.com By Joe Cooper jcooper@hartfordbusiness.com F ailed attempts to redevel- op a 180-acre corporate campus in Wallingford vacated by drugmaker Bristol-Myers Squibb has left a major vacancy on the town's well-traveled Research Parkway. It's been two years since Mass.-based developer-landlord Calare Properties purchased the sprawling campus for just $5 million, with hopes of leasing the state-of-the-art research facility to prospective office or biotech tenants. That hasn't happened, so Calare shifted its strategy and recently finished demolishing three large buildings on the campus, with no real plan on what to do next. A proposal to erect two warehouses on-site spanning 1.1 million square feet was previously rejected by residents. "We have 180 acres of new oppor- tunity because it's back to where it started," said Tim Ryan, the town's economic development strategist, adding that local officials communi- cate biweekly with Calare. "Now it's a matter of revisioning new oppor- tunities for the site." But that won't be easy, he admits. Wallingford's struggle to redevelop a mothballed corporate campus isn't wholly unique in Connecticut, or na- tionally. As more companies in recent years have ditched their leafy suburban campuses to move to cities, or simply downsize, some towns and developers have been left to figure out what to do with sprawling vacant office parks. In Connecticut, there's been mixed success in reusing shuttered corporate campuses, as landlords face a stagnant office market, rising construction costs and, in some cases, local opposition to new uses. "There is no formula for redevel- opment in one specific town," said John Cafasso, a broker for Colliers International Group in Hartford, who added certain cities or towns may be more attractive for redevel- opments than others. A 2015 report published by real- estate advisory firm Newmark Group Inc. that examined five highly dense U.S. office tenancy submarkets — including Parsippany, N.J.; the O'Hare section of Chicago; Reston and Hern- don, Va.; Denver; and the San Fran- cisco Bay area — found that up to 22% of suburban office space is at risk of becoming obsolete. That represented about 7 percent of the nation's office inventory, the report says. The report also said suburban office parks "do not offer the expe- rience most of today's tenants are seeking." "If tenants are not going to be able to walk to nearby retail or a nearby office property to get lunch, they had better be able to get it at their own building," the report says. In Greater Hartford, vacancy rates at Class A suburban office buildings in the fourth quarter of 2019 ranged from 13.6% in the "Hartford west" market (including Avon, Farmington, Simsbury, Southington and West Hartford) to a high of 31.8% in "Hart- ford north" (Bloomfield, East Granby, East Windsor, Enfield, Windsor and Windsor Locks), according to realty broker-advisor CBRE. Overall, Greater Hartford subur- ban tenants ceded 81,897 square feet of Class A office space last year, and 535,224 square feet of all office space. Cafasso says more Connecti- cut landlords are responding to tenants' chang- ing needs and wants by adding new amenities to their suburban office parks. Last summer, Colliers arranged the sale of Farmington's 30-year-old Pond View Corporate Center office campus for nearly $20 million. The new owner, New York's Sovereign Partners, is currently investing $4 million in the multi-tenant facility to add new electrical systems and upgrade parking lots, lounge areas, digital signage and food and bever- age service amenities, among other improvements. The hope is that upgrades to the two-building office park will in- crease tenancy there from 75% to 95% over time. "There's been no difference in Class A office rental rates compared to 10 years ago," Cafasso said. "The region as a whole has not been able to attract new tenants into the market." CT office migration A number of Connecticut cor- porations have made headlines in recent years by fleeing the suburbs for cities in and out of the state. That includes The Hartford Financial Services Group relocat- ing its Simsbury office employees to downtown Hartford and Windsor; Aetna moving its Middletown oper- ations to Hartford; General Electric vacating its Fairfield headquar- ters for Boston; and Bristol-Myers Squibb leaving Wallingford. MassMutual is also on pace to close and sell its 430,000-square-foot suburban campus in Enfield by year- end 2021. The pending closure means approximately 1,500 employees will relocate from Enfield to the life in- surer's Springfield headquarters. A "For Sale" sign has also been hung on speciality chemical manu- facturer Chemtura Corp.'s former 313,000-square-foot corporate head- quarters in Middlebury. Collectively, the moves added a significant amount of empty office space in the suburbs, shifted local employment levels, cut into munici- pal property tax revenue and forced towns and developers to rethink their redevelopment opportunities, which have led to mixed results. Wallingford and Simsbury have had issues finding new uses for their vacant properties. In Simsbury, New Jersey real estate development firm the Silverman Group didn't waste time demolishing 640,000 square feet of office space formerly owned by The Hartford af- ter it acquired the 172-acre property for $8.5 million in Dec. 2016. The Silverman Group is redevel- oping about 40 acres of that land with apartments, townhomes and two new vacant commercial build- ings and a separate developer is erecting a 120-unit assisted-living facility there, a property manager said. But the remaining 132 acres, which encompassed The Hartford's entire Simsbury campus, remains undeveloped with no future plans. The Silverman Group didn't re- spond to requests for comment. Town Planner Michael Glidden said Simsbury is willing to col- laborate with the Silverman Group, already one of the town's largest taxpayers, to continue developing the former office park, but hasn't come up with any solutions. "It's all about being creative on what you can fit in that box," Glid- den said. "It's especially important Office Reboot Vacant suburban office parks present challenges, opportunities for CT landlords, municipalities FOCUS: COMMERCIAL DEVELOPMENT Greater Hartford office market snapshot Total Vacant 2019 Net Avg. asking Market sq. ft. (%) absorption rent (Gross) Downtown Hartford 9.7M 17 -161,833 $21.41 Downtown Class A 5.9M 18.4 -182,958 $23.28 Hartford suburbs 15.5M 19.1 -535,224 $18.81 Suburbs Class A 9.6M 19.3 -81,897 $19.87 Source: CBRE Bristol-Myers Squibb's former Wallingford research center was recently demolished and the land remains vacant. PHOTO | CONTRIBUTED John Cafasso, Broker, Colliers International Group

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