Hartford Business Journal

7 HARTFORDBUSINESS.COM | FEBRUARY 28, 2022 Under the 2018 tax-fixing agreement the city placed a $21.4 million market value on the 17-story tower at 100 Pearl St. Absent that deal, the building would have been taxed at $34 million, Philip said. The latest reval values the property at $24.4 million. Schlossberg argues the 2018 agreement didn't provide tax breaks, but was rather an agreement settling upon reasonable values. He also noted that 350 Church St. – which rose 25.8% in value under the current revaluation – wasn't subject to the agreement. "They didn't give us a tax break," Schlossberg said. "They agreed the assessment at the time was to be reduced to meet what was an agreed upon number, not to go back and increase it afterward… ." Full reval impact Mayor Luke Bronin acknowledged the difficulties faced by downtown office properties on Jan. 10, when he used an online town hall to discuss the revaluation's impact. Bronin, and Philip, warned the tax burden will likely shift toward residential property owners. Values for commercial properties, led by a decline in office buildings, dropped about 10% while a hot housing market saw residential property values jump around 30% to 46%. Multifamily properties gained values at greater rates. Office buildings represent about 20% of the tax base, Bronin warned. "So, when you have office buildings and commercial buildings going down and you have residential properties going up, it means you have a shift and that is a big change that presents real challenges," Bronin said. Bronin said he hopes to lower the city's 74.29 mill rate, tempering the tax impact of higher assessments. Bronin's exact tax rate proposal will be released with his city budget proposal in April. Hartford taxes differently than every other Connecticut municipality. Others apply their mill rates against 70% of a property's estimated fair market value. Hartford does that for commercial properties. But when it comes to residential properties, Hartford's tax rate is applied against only about 36% of the fair market value. It means the tax rate is effectively halved for residential properties. In his Jan. 10 address, Bronin told residents he probably has the ability to push back the revaluation by a year due to COVID-19 impacts. But he said he fears commercial values will only continue to drop, shifting even more of the tax load onto residential property holders. "You can see it just by walking by our office buildings and seeing how empty they are right now," Bronin said. "There is a lot of reason to expect that a lot of the companies that have office space are going to renew their leases with less office space the next time. Some of them may even decide they are going to shift virtual altogether. That has a real impact on commercial values." Silver lining There may be some good news for office properties in the months ahead. Three of the city's largest employers — Travelers Cos., The Hartford and CVS Health/Aetna — recently announced plans to send thousands of downtown employees back to the office in March and April. And while those companies mostly own rather than lease space, their presence could bring back some much-needed vibrancy and help spur other leasing activity downtown. In a subsequent interview, Bronin argued there is another silver lining. Long term, the same forces that carried workers out of offices could untether companies from more expensive cities, he said. "To me the story is by no means all negative," Bronin said. "I think the change in work patterns presents significant opportunities for cities like Hartford. As companies take a look at their footprint and employee base, they might not feel so tied to large metro centers like New York or Boston. But seizing on those opportunities will take some time." Market outlook In the short term, Hartford's office market faces challenges. There are several "very large" downtown office tenants that are contemplating downsizing their footprint when current leases expire, or even moving entirely out of Hartford, Schlossberg said. About 20% of downtown office space is currently not under lease, Schlossberg said. And only about 10% to 15% of currently leased space is actively being used, he said. That squares with office market data provided by realty consulting firm CBRE, which showed downtown Hartford had an overall office vacancy rate of 18.8% at the end of the fourth quarter, while Class A properties had a 21.7% vacancy rate. "Those are serious and not good numbers for the city," Schlossberg said. "That also drives the rate you can charge a tenant because there is a lot of space available. Plus, the cost of putting a tenant into a space has risen 20% to 25% during COVID because of supply chain issues, because practical goods are not available." The average gross asking rent in downtown Hartford was $22.42 per square foot at the end of the fourth quarter, according to CBRE. Schlossberg said Shelbourne, while anxious, is hopeful officials will respond to its concerns. If not, Shelbourne is ready for a legal battle, he said. Joel Grieco, executive director of brokerage firm Cushman & Wakefield, said the downtown office market has little demand right now beyond existing tenants. And many of those are likely to seek smaller spaces when current leases expire, he said. The pandemic had a huge impact, but downsizing forces were in play before COVID-19, Grieco said. UnitedHealthcare leases almost half of City Place I, the city's largest office tower, but there is great uncertainty how much it will occupy in the near future, Grieco said. "UnitedHealthcare was adopting a work-from-home approach prior to COVID," Grieco said. "They were getting very efficient doing so." Grieco said he thinks rental rates have sunk as low as possible. He anticipates vacancies growing, but no further reduction in rental rates. "Landlords right now are writing leases that are break-even," Grieco said. "They want to be better than vacant and hope things improve by the time the tenant renews." DEAL WATCH Majority of Class A downtown Hartford office buildings see declining values amid pandemic-induced vacancies Address 2020 value (in millions) 2021 value (in millions) % Change 20 Church St. (Stilts Building)* $28.3 $33.1 17% 350 Church St. (Metro Center)* $24.4 $30.7 25.8% 755 Main St. (Gold Building)* $64 $62.3 -2.7% 100 Pearl St.* $21.4 $24.4 14% 185 Asylum St. (City Place I) $103.4 $82.3 -20.4% 151 Asylum St. (City Place II) $20 $18.5 -7.5% 225 Asylum St (Goodwin Square) $14.6 $13.6 -6.8% 10 State House Square $61.9 $59.4 -4% 1 State St. (400 Columbus Blvd.) $45.1 $38.4 -14.9% 242 Trumbull St. (218-260 Trumbull St) $7.8 $6.3 -19.2% 280 Trumbull St. $38.1 $31.3 -17.8% 1 American Row (Boat Building) $21.5 $18.9 -12.1% * Indicates properties owned by Shelbourne Global Solutions. Source: Hartford Assessor's Office Mayor Luke Bronin Former chicken wholesale property in South Windsor sells for $1.27M A 2.6-acre South Windsor property that formerly housed a Waybest Chicken Wholesale Outlet has sold for $1.27 million. The industrially zoned property at 1518 John Fitch Blvd., hosts four buildings totaling 33,900 square feet, including large refrigerated and freezer sections. Gordon Holdings LLC sold it to REAG 1518 JFB LLC in a sale recorded Dec. 16. Daniel A. Rosow, owner of South Windsor-based brokerage firm Real Estate Advisory Group, is principal of the buying limited liability company. Rosow said his firm primarily buys older and distressed industrial properties to rehab and then lease out. The company focuses on midsized properties, renovating them to suit new users, he said. The chicken wholesale business had been closed for more than a year, Rosow said. "We are excited about bringing new life to the property," Rosow said. Rosow said he bought the property as part of a tax-deferred exchange after selling another South Windsor property — at 195 Commerce Way — last year. 1518 John Fitch Blvd., South Windsor. PHOTO | COSTAR

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