Hartford Business Journal

8 Hartford Business Journal • July 27, 2020 • www.HartfordBusiness.com By Joe Cooper jcooper@hartfordbusiness.com G alaxE.Solutions Inc., Hartford's newest IT services firm, entered 2020 with an ambi- tious plan to hire up to 200 workers by summer in newly leased office space, and was even considering buying a tower downtown. But those plans were made months before COVID-19 began to spread across Connecticut, and as offices and busi- nesses largely closed downtown to limit the spread of the novel coronavirus. While Connecticut has become a leading state in curtailing the virus, downtown offices, including GalaxE's 24,000-square-foot space at the City- Place I skyscraper on Asylum Street, remain largely empty as positive cases spike nationally and companies find success working remotely. "There's no indication when we will go back into the workplace," said Chandra Dyamangoudar, vice president of GalaxE's Hartford office, which employs just over 50 people downtown. "We will continue to aim for [hiring 200 employees]. COVID-19 has definitely impacted some of those expectations, and how we will achieve some of those strategies." GalaxE is one of many compa- nies either delaying or rethinking expansions downtown as the health pandemic casts uncertainty over economic conditions and when and how it's safe to return to offices. Hartford HealthCare, parent of Hartford Hospital, in a statement said the "tremendous financial burden" created by the COVID-19 out- break has forced the health system to reassess how to relocate 400 employees and hire another 300 for its newly leased space in downtown's 100 Pearl St. office tower. Indian tech company HCL Technol- ogies, which plans to open a global delivery center in Hartford, recently said its Capital City expansion is "de- layed because of the initial outbreak of COVID." It did not provide addi- tional comment on when it plans to lease or occupy downtown space. Moreover, new office leasing and renewals are also being disrupted because many companies have implemented a hiring freeze until the pandemic subsides. Downtown brokers say there are few new office leases being signed due to tenants fearing a second wave of new COVID-19 cases in Connecticut. Larger employers, they say, have not yet made any long-term leasing decisions, but those could be on the horizon. According to the Brookings Institu- tion, more than half of U.S. employees worked from home during initial COVID-19 shutdowns, and companies like Google, Twitter, Facebook and Morgan Stanley plan to continue allowing workers to telework until the pandemic is over. That could result in a major downsizing of the $2.5-trillion office market and the bars, restaurants and housing options that surround them. In Worcester, a similarly sized city to Hartford, insurer Unum recently announced plans to close its office there and direct 400 employees to permanently work from home. Hartford's office market could face a similar experience depending on when leases end, if another wave of positive cases further delays Con- necticut's phased economic reopen- ing, and how soon a COVID-19 vac- cine is widely available, experts say. "Overall, [leasing] activity is down substantially," said Jonathan Putnam, executive director of commercial real estate broker Cushman & Wakefield Inc.'s Hartford office. "There aren't many people that are out actively looking in the market. The summer is slower any- way in most cases, but it's more notice- able now for us." Leasing uncertainty With many expansions and lease renewals on hold, area brokers expect down- town's first-quar- ter vacancy rate of 17.7% to tick upward slightly by year-end. Just how high vacancies go, they say, will depend on a few key factors, including: whether or not landlords invest in new touchless and air- filtration technologies, and how that might impact confidence in return- ing to the office; how positive cases trend in Connecticut; and whether tenants sign short-term lease exten- sions for additional time to evaluate long-term investments. "I think technology will solve many of the problems related to the office environment to make it safer, or less likely people would be sharing germs," said Putnam, just days after an undis- closed client leased new office space at the Goodwin Square office tower on Office Shedding? Hartford's office market in limbo as COVID-19 uncertainty delays expansions, renewals Downtown Hartford's Goodwin Square (left) and CityPlace I (right) office towers. FOCUS: REAL ESTATE Hartford's office market — 1Q 2020 Buildings Total Sq. Ft. Vacant % Avg. asking rent (Gross) Central business district 39 7,969,081 19.7% $21.99 Class A 15 5,824,753 19.9% $23.29 Hartford periphery 39 1,763,705 8.9% $15.93 Class A 1 113,182 1.9% $23 Total downtown Hartford 78 9,732,786 17.7% $21.34 Source: CBRE Chandra Dyamangoudar, Vice President, GalaxE.Solutions Jonathan Putnam, Executive Director, Cushman & Wakefield Inc. Christopher Ostop, Managing Director/Broker, Jones Lang LaSalle LLC HBJ PHOTO | JOE COOPER HBJ PHOTO | JOE COOPER Tenants have been slowly returning to the 750 Main office tower (right).

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