Hartford Business Journal Special Editions

28 Hartford Business Journal • November 26, 2012 www.HartfordBusiness.com Celebrating 20 Years of Business News Tell your story effectively and move closer to achieving your goals. Public Affairs | Advocacy Writing | Crisis Communication Content Development | Public Policy | Project Management www.express-strategies.com Free DownloaDs "On One Page" Exclusive Communication Strategies Bernard Kavaler, Founding Principal 860-729-3021 express.strategies@gmail.com REAL ESTATE 20 Years of XL Center, which gave Hartford its first taste of high-end apartments. Trum- bull on the Park and The Lofts at Main and Temple Street were also significant downtown housing additions. • A downtown higher education center that turned the former G. Fox & Co. Department Store into the new home of Capital Community College. Since find- ing a niche as the only public institution college in Hartford, Capital Community College has seen its enrollment surpass 4,500 students. • Riverfront infrastructure, including the Columbus Boulevard Bridge, river walk pedestrian pathway, and State Street landing dock. • Connecticut Science Center, a 154,000-square-foot, state-of-the art edu- cation destination that features over 150 interactive exhibits in 40,000 square feet of gallery space and a 3D digital theater. • Front Street, a 66,000-square-foot mixed-use development that was sup- posed to attract retailers to downtown Hartford. After remaining vacant for years after its 2010 construction, Front Street has its first three tenants signed including Spotlight Theaters and live music venue Infinity Hall. • Rentschler Field, a $375 million sports stadium in East Hartford that plays host to the University of Connecticut football team. CRE rollercoaster For private industry, the commercial real estate scene in downtown Hartford has gone through a tough two decade stretch. There were two waves of significant office building foreclosures downtown, the first taking place in the early 1990s. That was a time when Hartford was coming out of its heyday, Grieco said. In the 1980s, Hartford boasted one of the lowest office vacancy rates in the country at around 6 percent, and developers were rushing to Hartford to build new office towers. The most significant proposal was the Cutter Financial Center, which was proposed to be built at the corner of 101-111 Pearl St. and serve as the largest office tower in New England. That project, and countless others, never happened especially in the wake of the Savings and Loan crisis of the late 1980s and early 1990s, which hit Hartford hard, leading to a wave of bank consolidations that shrunk the footprint of many downtown tenants. "It was a thriving market with a lot of ener- gy and lot of promise," Grieco said. The second wave of foreclosures hap- pened in the past four years following the 2008 financial crisis. And it caused the real estate empire of downtown Hartford's larg- est commercial landlord—Northland Invest- ment Corp.—to crumble. Northland was a major investor in Hart- ford and its chairman Larry Gottesdiener, a major cheerleader in attempting to turn Hart- ford into a 24/7 city. Over the last 20 years, Northland bought about a half-dozen major downtown properties including Goodwin Square, CityPlace II and Metro Center, and built from the ground-up the Hartford 21 mixed-use development connected to the XL Center. But Northland overleveraged many of its properties, taking on too much debt with the hopes that property values would increase so they can eventually make strong returns on their investments. But property values in Hartford took another significant hit with the 2008 recession, and skittish lenders were unwilling to renegotiate mortgages like they had in the past. As a result, Northland lost Goodwin Square, CityPlace II and Metro Center to fore- closure and has become an afterthought in playing a significant role in Hartford's future. Meanwhile, other landlords downtown have also faced challenges over the past 20 years. A stagnant market with few sig- nificant new businesses taking residency downtown has caused rental rates to remain about the same over the past two decades at about $23 per square foot, while operating costs—particularly property taxes—have risen significantly. "Rental rates in downtown Hartford inched upward here and there because of some tightening in the market, but in gen- eral they haven't changed," Grieco said. "The from page 26 difference is that operating expenses have gone up. That means if you were a tenant in Hartford over the last 20 years, you've had favorable and predictable economics. If you were a landlord, it means your margins have continued to get squeezed." New trends in how companies manage their workforce has also impacted commer- cial real estate downtown. The work-at-home concept, which has been utilized by many of Hartford's corpo- rate tenants — including Aetna, The Hartford and Travelers — has reduced office space needs for many employers, contributing to elevated office vacancy rates downtown. The future Looking forward, there is once again a buzz in the city of Hartford. With a new regional development agency leading the way, and significant sup- port coming from the Malloy Administration, tens of millions of dollars are being poured into the city in a new wave of public-private partnerships. With a focus on adding 2,000 more resi- dential units in the Capital City, moving col- leges and state agencies downtown, and cre- ating a more pedestrian friendly environment through the iQuilt project, observers say the next 20 years brings much more hope and optimism. "I get the sense now that the powers that be and the market forces are aligned in such a way that Hartford feels as though it will be more nimble in enacting things and achiev- ing things in the next 20 years," Grieco said. "I feel like Hartford will be a much different city than it is today." g New trends in how companies manage their workforce has also impacted commercial real estate downtown. Northland Investment Corp. Chairman Larry Gottesdiener was bullish on the Hartford market before the real estate empire he built in the city collapsed over the last few years. Hartford 21 remains Northland's prized asset.

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