Hartford Business Journal

www.HartfordBusiness.com • April 6, 2020 • Hartford Business Journal 17 Ostop, a managing director/broker of Jones Lang LaSalle LLC (JLL). Ostop said larger tenants could also look to delay a long-term decision by opting for a short-term lease until the national economy is steady again. "Hopefully the light switch just gets turned back on and we all say 'this wasn't as bad as I thought, let's get back to work,' " Ostop said. "The good news is that financial markets were hugely strong right before we went into this. That wasn't the case in 2008." Jonathan Putnam, executive direc- tor of commercial real estate broker Cushman & Wakefield Inc.'s Hartford office, said he also expects prospec- tive tenants to be more cautious about making those "hard decisions." The health crisis, he says, will also force more companies to review their ability to allow telework. But that will only continue a trend where more employers are offering telecommut- ing and additional flex workstations. "We are all going to feel an impact, it's just a question of how much and how long it takes to shake itself out," Putnam said. Greater Hartford's Class A office market is already coming off a weak 2019. In fact, Hartford and nearby suburbs collectively saw tenants shed a net 535,000 square feet of space last year, according to realty broker-advisor CBRE. Downtown Hartford's Class A office vacancy rate also climbed slightly to 18.7%, as tenants shed a net 170,000 square feet. Prudential and Travelers Cos. both shed space downtown last year in- creasing the vacancy rate, which was further impacted by mergers and acquisitions and more companies adopting agile work environments that fit more people into less space. However, the hope was 2020 would be a better year, as up to eight com- panies were in talks to lease about 245,000 square feet downtown during the first half of this year. The state's "Stay Safe, Stay Home" campaign to mitigate the spread of COVID-19 has altered those expectations. "The question is, how much dam- age has been done between when we started the shut downs to when we come out of it?," Putnam said. "It's just impossible to know." Luckily, a few significant leases were recently completed, including Hartford HealthCare signing for 80,000 square feet at 100 Pearl St., where it will relocate 400 employees and hire 300 more as part of a major expansion, and IT services firm GalaxE.Solutions Inc. leasing 24,000 square feet at City Place I. A final blow to retail? Downtown's already lagging retail sector faces the largest potential fall- out from the pandemic, brokers and economic development officials agree. Morneault's Stackpole Moore Tryon, a longtime retail fixture at the corner of Pratt and Trumbull streets, on March 20 became one of the first retail- ers downtown to voluntarily close its doors during what it described online as an "unprecedented" crisis. A sign on the men's and women's clothing store says the business will reopen "when the viral emergency is over," but nationwide calls for "social dis- tancing" could be enforced through the entire spring shopping season, state and national health officials say. That means retailers will need to survive on cash reserves and e-com- merce sales for now. The state did roll out a no-interest loan program of up to $75,000 for small businesses hit by the crisis, but it was swamped by more than 4,000 applications within a day or so. "Retail has been struggling forever with all of the changes in the economy, this may be something that pushes it to a whole new dimension," said Michael Freimuth, executive direc- tor of the quasi-public Capital Region Development Authority, whose agency is providing a $20-million subsidy for a $100-million mixed-use project to transform Hartford's Pratt Street retail corridor into a vibrant neighborhood. Freimuth said that project could be slowed. "There was a drifting toward en- tertainment experience, the social- ization of retail — this is a shock to that thinking," he said. Restaurants and hotels are also experiencing significant revenue shortfalls because of mass closings, Freimuth and others say. One national hotel expert from the American Hotel and Lodging Association recently estimated a year-long occupancy rate of about 30%. On Asylum Street, Homewood Suites decided to close permanently because ownership thought it made little sense to stay open amid declin- ing occupancy and no clear end-date to widespread quarantines. Hotel oc- cupancy in Greater Hart- ford before the crisis typically hovered around 60%, just shy of national aver- ages, according to market data firm STR. Occu- pancies in downtown Hartford have dropped to as low as 15% in recent weeks, Freimuth said. Meantime, the restaurant/bar industry, which generated $8.9 bil- lion in gross sales last year, has been forced to close dine-in service until further notice and is asking for state tax relief and loans to stay afloat. At V's Trattoria and Vito's To Go Cafe at 280 Trumbull St. downtown, revenues are down about 90%, own- er Rob Maffucci said. Together the two locations usually pull in about $40,000 per week, but since mov- ing to takeout only in recent weeks, the restaurants do between $100 and $500 per day; normally they do about $1,000 in daily takeout. But Maffucci, who has been a fixture in downtown Hartford's restaurant scene for about three decades, is cau- tiously optimistic that the state and federal governments will provide the industry with a sufficient bailout. Res- taurants work on razor-thin margins and shut down in a show of coopera- tion and good faith, Maffucci said. "We had to lay off most of our staff, and we're hoping that the gov- ernment has a good plan to main- tain payroll, otherwise it would be bleak," Maffucci said. The case for optimism At least one reason for optimism is that Hartford is not alone in the coronavirus pandemic, according to MetroHartford Alliance CEO David Griggs. Small businesses nationwide are set to share $377 billion in funding from a $2-trillion federal stimulus package known as the CARES Act, which will be a lifeline to many small businesses and self-employed workers. Also, in addition to bridge loans provided by the state of Connecticut, small busi- nesses in-state are eligible for federal Small Business Administration (SBA) loans of up to $2 million. Griggs said MetroHartford Al- liance, which promotes economic development in Greater Hartford, is working with companies to help them access funding provided by the state and SBA to lessen the blow to Connecticut's economy. "In some regard it seems very pos- sible that some businesses that were walking a very thin margin might not come out of this in a good way," he said. "I think that's anticipated and why the federal and state governments are doing everything they can to get cash into the companies that need it most." Griggs also said Lamont's office is doing "an awesome job" of commu- nicating with the business commu- nity about what it needs to survive the economic fallout from social distancing. That will sustain Hart- ford's recent momentum. "The city has been on an excellent trajectory as of late … and we want to do everything we can to make sure we bounce back quickly at the end of this," he said. Sean Teehan contributed to this story Some economic development officials, including David Griggs (left) from the MetroHartford Alliance and Mike Freimuth (center) of the Capital Region Development Authority, say they are hopeful Hartford will rebound from the current crisis quickly. Rob Maffucci, owner of V's Trattoria and Vito's To Go Cafe in Hartford, said the shut down is significantly hurting his business. Christopher Ostop, Managing Director/ Broker, Jones Lang LaSalle LLC (JLL) Jonathan Putnam, Executive Director, Cushman & Wakefield Inc. PHOTOS | HBJ FILE

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