Hartford Business Journal

5 HARTFORDBUSINESS.COM | MAY 17, 2021 DEAL WATCH employees who feel unsafe about coming back or who simply prefer remote work; decisions about office layouts, space needs and hybrid scheduling logistics; liability concerns; and potential employee resentment over some positions being allowed to work remotely when others are required to be present. Long-term planning Joel Grieco, executive director at real estate brokerage Cushman & Wakefield, said he thinks employers are going to bring back a significant portion of their workers, just not instantaneously. "Some companies are still making shorter-term decisions right now because they're still solving for their workplace of the future," Grieco said. "They're still solving for just how hybrid they're going to be." Jonathan Putnam, also a Cushman & Wakefield executive director, said some larger employers had already set plans in motion for fall return dates before Connecticut's vaccine rollout accelerated more quickly than previously expected. "I think we arrived at this place sooner than people might have thought," Putnam said. "Now we're just at the beginning of that change in the direction of the wind here." David Griggs, president and CEO of the MetroHartford Alliance, said his member employers have had a more positive outlook over the past month or so, likely due to the accelerated vaccine roll out, spring's arrival, and the return of Yard Goats baseball and other events. Still, companies realize that previously scheduled office homecomings have been delayed multiple times since the start of the pandemic last March, when many employers and workers figured — erroneously, as it turned out — that a brief, partial lockdown would wipe out the virus. "When we left last March, we thought we were all leaving on a two- week snow day," Griggs said. "I think what we've all learned is we have to be very flexible and fluid in what we plan for." For some, the fear of vaccine- beating COVID-19 variants lingers, and scientists say herd immunity against the virus, which would By Matt Pilon mpilon@hartfordbusiness.com Downtown Hartford's major office buildings remain relatively deserted compared to pre-pandemic times, which creates potential problems for building owners. "It makes it harder to lease additional space because it looks like a ghost town," said Gary B. O'Connor, a commercial real estate attorney at Pullman & Comley. "[Owners] want the tenants to come back." Hartford's largest office landlord, Shelbourne Global Solutions, certainly wants its tenants to start beckoning workers back to the workplace as soon as possible, said Benjamin Schlossberg, managing member of the New York-based realty company. "We need to keep our buildings full, occupied and vibrant and it's hard to do if people aren't at work," Schlossberg said. "For us it's a real urgency." However, building owners have little to no power to compel tenants — many of which continue to pay their rent — to return more quickly than planned, and incentives don't seem to be an effective option either. "Unfortunately, there's almost nothing we can do," Schlossberg said. "Just to go to a total extreme, if we told tenants 'free rent for three months if you occupy fully,' they're not coming back [any faster]." Indeed, a few months worth of rent isn't a key factor driving most larger employers' thinking on the return-to- office topic, O'Connor said. "For these employers, it's not a question of whether they can afford their spaces, it's really more a question of when the employers are going to feel comfortable bringing back their employees," he said. As they await tenant decisions they can't control, office owners are instead focusing on what they can: Keeping their buildings maintained, adopting more rigorous cleaning schedules and investing in safety features and overall upgrades, from better HVAC systems and elevators to touchless appliances. "One of the very few silver linings of the pandemic is that it was a great time for building owners to do these projects," said Jonathan Putnam, executive director of brokerage firm Cushman & Wakefield. Joel Grieco, also a Cushman & Wakefield executive director, said while landlords haven't landed on any effective ways to spur or draw their current tenants back to the office, they have been willing to sweeten the pot when necessary in negotiations with new and renewing tenants. For example, some office properties are agreeing to shorter leases with more flexible terms, discounted rent, free signage, and providing physical features like outdoor patios or other places designed for employees to socialize or simply take a more enjoyable break. "Landlords recognize that as companies bring employees back to work, they are dealing with employees that have had a lot of flexibility and luxuries while working from home," Grieco said. Anxious office owners have little leverage to entice tenants to bring workers back Gary B. O'Connor Office space inside the Stilts Building in downtown Hartford, 20 Church St. PHOTO | COSTAR Quarter/Year Office vacancy rate 4Q-2019 17% 4Q-2020 18.1% 1Q-2021 18.9% 1Q-2011 26.1% Hartford office vacancies have ticked up during COVID-19 pandemic Downtown Hartford's office vacancy rate has increased by nearly 2 percentage points since COVID-19 first arrived in Connecticut, according to data from CBRE, but local real estate experts expect vacancies to rise more over the next year or so. For now, vacancy levels remain well short of their peak following the 2007-2009 Great Recession. Source: CBRE Jonathan Putnam Joel Grieco The State House Square office complex (shown right) in downtown Hartford. HBJ PHOTO | STEVE LASCHEVER Continued on page 6

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