Hartford Business Journal

HARTFORDBUSINESS.COM| JANUARY 9, 2023 19 HBJ PHOTO | STEVE LASCHEVER PHOTO | COSTAR INDUSTRY OUTLOOK | REAL ESTATE The downtown Hartford office market had a 21% vacancy rate at the end of the third quarter, according to CBRE. Amid increasing vacancy rates, Hartford office market prepped for a reset By John McCormick and Anna Kocsondy T he reset button has been hit on Greater Hartford's office market, its corporate employ- ers and governing municipalities. Hartford, like other similar-sized cities, is dealing with an oversupply of office space post-COVID. The most recent statistics showed that Greater Hartford companies shed approximately 585,000 square feet of office space in the third quarter, with sub- market vacancy rates ranging from 20% to 35%. There are currently more than 20 vacant office buildings in Greater Hartford and some are being reposi- tioned to other uses including multi- family, self-storage, industrial, medical office and other municipal uses. Several types of hybrid work options have emerged and taken hold over the past two years: • Traditional in office four-plus days per week; • Two or three days per week in the office with remainder remote for "heads-down" work; • Fully remote and only in office for scheduled meetings or training; • Distributed work where a company has no physical office space, and all employees are fully remote. Industry types and company size play a major factor in each employ- er's decision. Hartford's largest com- panies have elected for two or three days in office for collaboration with the remainder of the days remote. Distributed work is the most drastic and has only been implemented by companies with very few employees, resulting in little effect on the market. The one constant in all these sce- narios is the power of the employee in driving the hybrid agenda. The flexible work schedule has become another item on the menu of employee benefits, such as health insur- ance and the 401(k). Despite the shift to hybrid work, the office remains the silent partner in company culture. Today, corporations are seeking amenity-rich buildings or neighborhoods to entice employees back to the office, and "plug-and- play" opportunities to reduce costs and lease terms. Companies need less physical space and more creative work envi- ronments. There have been several major deals over the past year that have reflected these trends: • Sun Life leased 46,000 square feet, at One Financial Plaza (the Gold Building) in Hartford. This suburban-to-urban relocation from Windsor will allow employees to experience first-class building amenities, a central location, and retail benefits of the city. • Landmark Partners/Ares Manage- ment saw an opportunity in busy West Hartford Center, leasing 21,000 square feet at the Ruther- ford Building in Blue Back Square. Landmark will relocate from its cor- porate-owned building in Simsbury. • United Way of Connecticut will relo- cate from a Class B office building on the Silas Deane Highway in Rocky Hill, to 41,500 square feet of Class A space at 55 Capital Blvd., also in Rocky Hill. The Silas Deane building is currently awaiting approv- als for conversion to multifamily. • Women's Health needed a central office location with superior high- way access and large, open and efficient floorplates. The company is relocating from Avon to Rocky Hill, leasing 23,000 square feet at 175 Capital Blvd. • Vixxo looked to the suburbs for its amenity-rich, plug-and-play space, leasing 9,500 square feet at The Atrium in Bloomfield. • Day Pitney LLP was able to take advantage of a long-term sublease opportunity at Goodwin Square, which provided both a sublease for 36,000 square feet and a direct lease for an additional 6,000 square feet. Perhaps the most compelling news is that cities and towns are also part of the reset. Greater Hartford munici- palities have historically been reac- tive regarding real estate but now are proactively engaging in plans to improve opportunities for growth and adaptive reuse development. The Hartford Chamber of Commerce's Hart Lift program, announced in December 2021, is a good example of proactive gov- ernment. The Chamber directed $6 million from the American Rescue Plan Act into the Hart Lift Program, which provides incentives to Hart- ford property owners to help them fill vacant retail storefronts. The program is adding vibrancy to Hartford's streets by attracting new residents, businesses and visitors, and has made it possible for startups to afford a brick-and-mortar storefront. While the grants have been dis- tributed citywide, historic Pratt Street has seen an unprecedented boom with 10-plus new retail leases in the past year. As we look to 2023, we believe vacancy rates will continue to increase in some cases to historically high levels. Employers will focus on real estate opportunities in vibrant neigh- borhoods, amenity-rich buildings, and/ or plug-and-play alternatives. John McCormick is the executive vice president and Anna Kocsondy is vice president of commercial broker- age firm CBRE in Hartford. John McCormick Anna Kocsondy Companies are incorporating new office perks to lure people back to the office, including golf simulators.

• Cover