Hartford Business Journal

HARTFORDBUSINESS.COM | FEBRUARY 24, 2025 27 FOCUS | BANKING & FINANCE As a CT-based community bank, we've been serving local businesses for over 153 years. We offer a wide range of traditional financing solutions and specialize in SBA lending to help take your business to the next level of success. We can help build your business. TM To learn more, call our Business Banking team at 203.729.4442. Pictured L to R: Joel Mastroianni, Tracey San Angelo, and Garett Luciani. Member FDIC Equal Housing Lender SBA Preferred Lender and lenders continue to maintain unrealistic expectations and an approach that is out-of-touch with the harsh realities of the current market. Nevertheless, Shelbourne continues to pursue all avenues to retain and revitalize its portfolio." Limited exposure All banks are working through some level of concern with their office loan portfolios, said Luke D. Kettles, president and CEO of Windsor Federal Bank, which has $803.3 million in assets. Some banks are working "aggres- sively" to push office borrowers out, while others are extending loan terms, he said. There is some light on the horizon, given a noticeable trend of corporations and government bodies requiring a return to work, Kettles said. Even so, it's too early to tell when that will register positively on the market, especially in Connecticut, which has been particularly hard-hit by the remote working trend, he said. The challenges facing Connecti- cut's office market will be compounded by lenders' ongoing reluctance to lend into it, Kettles said. However, there is some good news — Connecticut-based banks have only limited exposure to the office market, especially in Hartford, according to John Carusone, president of the Bank Analysis Center. Most of the major commercial build- ings in Hartford are financed through real estate investment trusts, partner- ships or limited liability companies, rather than banks, Carusone said. Meanwhile, Connecticut banks have greater capital strength, cleaner loan portfolios and better reserves compared to past office market downturns in 2008 and 1992, he said. The 29 banks headquartered in Connecticut reported 1.16% of their nonfarm, nonresidential commercial real estate loans as nonperforming at the end of the third quarter of 2024, according to Federal Deposit Insur- ance Corp. data. By comparison, Connecticut-based banks reported nonperforming loan ratios of 0.66% and 8.02% in 2008 and 1992, respectively. Vision for future Hartford Mayor Arunan Arulam- palam, who is in his second year in office, said he's pushing on multiple fronts to attract new business to the city as he continues to support construction of new apartments. He's leading a Hartford-based team to secure part of a $100 million state grant pool to create an artificial intel- ligence hub downtown that supports the city's bedrock healthcare and insurance industries. Downtown Hartford has also attracted some new tenants in recent years, including environmental engineering firm Fuss & O'Neill, law firm Gordon Rees, PES Structural Engineers, and insurers Talcott Resolution, Selective Insurance and SunLife Financial. Arulampalam said he hopes for a significant piece of a proposed $50 million "Greyfields Revitalization" fund contained in Gov. Ned Lamont's recently proposed state budget. That fund would provide incen- tives to either demolish underused and derelict retail and office properties, or convert them into multifamily housing. "We've got the largest struggling commercial office sector in the state," Arulampalam said. "And so, I would expect that greyfields program would benefit Hartford more than any other municipality in the state." A working group involving top state and city officials has been meeting to create a plan to "right- size" Hartford's office footprint, Arulampalam said. Their work includes identifying space that is or will become vacant, and figuring out ways to fill it, including potentially by conversion to multifamily or some other use. Arulampalam said he hopes converting smaller office buildings downtown might push companies into the larger, class A towers, which are critical to the city's tax base, to stabilize them. "Our goal is to right-size our down- town for now, and then adapt to the needs of the future as they come," Arulampalam said. DOWNTOWN HARTFORD OFFICE MARKET SNAPSHOT (AS OF 4Q, 2024) TOTAL INVENTORY (SQ. FT.) 7.4M VACANT SPACE (SQ. FT.) 2.4M VACANCY RATE 32.8% AVG. CLASS A ASKING RENT (PER SQ. FT.) $23.91 Source: Cushman & Wakefield Q4 2024 Hartford office marketbeat report Luke Kettles

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