Hartford Business Journal

14 Hartford Business Journal • December 22, 2014 www.HartfordBusiness.com Industry Focus E c o n o m i c F o r E c a s t Watch List Commercial, residential realty market rebound likely to continue By Gregory Seay gseay@HartfordBusiness.com T he 2014 rebound under- way throughout central Connecticut's residen- tial and commercial real estate markets will continue in 2015, but experts see sever- al caution signs along the way. Downtown Hartford's conversion of outmoded office space into apartments had 700 units in vari- ous stages of renovation, with the first batch of rentals available now to tenants. Another 600 or so units are in the pipeline, as the quasi-state agen- cy overseeing downtown's redevelopment capitalizes the worthiest projects. Rising area apartment rents will continue to benefit not only downtown con- version land- lords, but the landlords of new and exist- ing multi-fam- ily complexes. According to Axiometrics LLC of Dallas, Texas, the average rent this year climbed 3.6 percent through the third quarter of 2014 vs. 0.6 percent in the same period of 2013. They are likely to climb just 3 percent next year, Axiometrics said. Foreclosures will remain a drag on the local realty mar- ket, experts say. Connecti- cut's time-consuming fore- closure process means that many of the private homes that lenders filed papers to seize two years ago will be coming onto the sales block next year. In addition, several large office buildings in downtown Hartford and suburban office and retail proper- ties have already been seized or are about to because they are at least 90 days past due in their mort- gage payments. For developers and con- tractors, rising prices for lumber, steel and other build- ing materials had an impact on bid pricing and profits in 2013, due largely to high energy costs for making and transporting them. Those pressures are likely to con- tinue through 2015. Construction contractors also say they are bracing for a shortage of skilled workers that is the result of renewed commercial and residential building nationwide. n Real Estate Gregory Seay W a t c h L i s t ExpErts cornEr Hartford office market tightens; investor activity rising By Giulia Wakim T he Greater Hartford office market continued to strengthen in 2014 with declining vacancy rates, as current and new tenants absorbed more space. Leasing activ- ity heated up in the third quar- ter with over 97,000 square feet of available space becom- ing occupied, representing the fourth consecu- tive quarter of positive gains. This pushed the vacancy rate down to 16.3 percent, which is the tightest the Greater Hartford office market has been in the past five years. While fourth quarter projections show leasing activity cooling down, investment sales activity remains strong. Investment sales activity has been prevalent in 2014 and will continue to play a major role in the Greater Hart- ford office market. Notable transac- tions include the sale of City Place II, which sold in late August for $20.6 mil- lion, and the $45 million recapitaliza- tion of 20 Church St. In mid-August, Constitution Plaza, a six-building mixed-use office and retail development, was placed on the market. The area surrounding Constitution Plaza is active with redevelopment. The former Sonesta Hotel is being converted into upscale apartments and approximately 2,500 state employees are expected to move into Connecticut River Plaza, which the state purchased in 2013. In early December, Trinity College committed $2.025 million to purchase 200 Con- stitution Plaza, a five-story, 135,000 square-foot building. The suburban office market also experienced robust activity this past year with over 10 office sales to date, with more expected to close by year- end. Suburban properties that final- ized sales in the latter part of 2014 included 1690 New Britain Ave., a fully- occupied, 165,000-square-foot building in Farmington, and 20 Batterson Park Road, a fully-occupied, 40,000-square- foot building in Farmington. Investors from near and far are starting to take note of Hartford's strengthening market as it continues to be a lower-cost investment than sur- rounding markets such as Boston and New York. In recent years, numerous colleges have added downtown footprints, increasing the number of Millenni- als in the center city. The University of St. Joseph and Capital Community College are both currently operating downtown, while UConn is redevelop- ing the former Hartford Times Build- ing, moving its West Hartford campus P H O T O | S T e v e L a S c H e v e r Giulia Wakim Continued

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