Hartford Business Journal

14 Hartford Business Journal • October 26, 2015 www.HartfordBusiness.com from page 1 Connecticut's Capital City. The Hartford Business Journal recently sat down or corresponded with eight veteran brokers at seven of the Hartford region's most active and visible commercial brokerages. Each has 25 years or more of real estate experience, nearly all of it toiling in the Hartford region and covering the two periods in the last two decades that central Connecticut has undergone two major commercial real estate slumps. Collectively, these brokers say Hartford's prospects in this stage of the second, most recent commercial-realty recovery look better this time around. But almost all harbor some doubts as to whether the halcyon days of the '80s for Hartford's office-space market will ever return. No office towers are likely to be built, absent an appreciable rise in office rents, or at least tenants' commitment for most of the space in any new office construction. Too many changes wrought by demograph- ics, the everyday impact of technology, along with a reworked perspective as to when, where and how people work have fundamentally altered the office-market fundamentals, they say. The Hartford region's slow absorption of office, retail and industrial space vacated during the Great Recession is a sobering reality, these brokers say, especially for older, less desirable space. However, some do see a pickup in the market in several more years. Here are some of their insights: JOEL S. GRIECO, Executive director, Cushman & Wakefield LLC's Hartford office Biggest deal this year: BlumShapiro's long-term office lease of about 50,000 square feet at 29 S. Main St. in West Hartford. The major differ- ence between this latest slump/recov- ery cycle vs. the last one to hit this market in the '90s, Grieco says, is the painfully slow absorption of empty office and other space. The previous recovery in Hartford com- mercial real estate took place in 1999. That year, Grieco recalls, Cushman & Wakefield's market report signaled a sustained recovery in the local economy. All the Hartford region jobs lost between 1989 and 1992 were recov- ered, office vacancies shrank in the face of 1.5 million square feet of leasing activity in Hartford County, he said. Hartford County's vacancy rate was 14.6 percent for all classes of office space. Today, in contrast, the market remains slug- gish, as does the local economy, Grieco said. "Vacancy stands at 19.8 percent. 2014 saw leasing activity of only 700,000 square feet,'' he said. "Yes, we have witnessed sales of some downtown office buildings, but I believe that's more reflective of investors being priced out of more expensive markets and looking for value plays in tertiary markets. However, downtown Hartford does have an encourag- ing convergence of positive events such as the baseball stadium, Front Street, success- ful conversions of idle properties into vibrant apartments, the pending UConn presence, the Convention Center, and iQuilt. The core of downtown has a more upbeat feel." The biggest difference he's noticed about the market recovery this time around is the great interest among tenants, especially ones with local ties, to relocate to downtown Hartford. "Grant Thornton, Cohn Reznick, Cantor Col- burn, C.M. Smith, Microsoft, Jorden Burt, Care- Centrix — these are all tenants that have moved from suburban locations to the Hartford [cen- tral business district],'' he said. "The key driver seems to be two-fold. First, the cost to be down- town is competitive with the suburbs, and sec- ond, companies trying to attract younger work- ers find it a benefit to be in an urban location." ANDREW D. FILLER, Veteran broker recently named principal of Canadian realty broker Avison Young's first downtown Hartford office. Biggest deal this year: A 10-year lease for 40,812 square feet at 60 Hartland St., Hartford. Filler, who start- ed his career in 1987 after graduating Trinity College by working for Avon commercial builder Casle Corp., says the creation of more down- town apartments, plus more employers choos- ing to locate in the center city, adds a dimen- sion to Hartford that didn't exist a decade ago. "Hartford just can't be an office park. Three years ago, it was a complete ghost town,'' he said, referring to the dearth of people and closed shops after hours weekdays and on weekends. "Now, on Sundays people are walk- ing around, having coffee. People walking the streets at lunchtime. I think it's cool.'' The impending arrival, Filler said, of UConn and Trinity, joining University of St. Joseph and Capital Community College, along with the relocation of former suburban tenants, are stimulating Hartford's downtown revival. "The lack of good space in the suburbs is driving people to look downtown,'' he said. Meantime, downtown Hartford's high office vacancy has benefited from the state's purchase in recent years of the 55 Farming- ton Ave. office tower and the Connecticut River Plaza towers, overlooking Constitution Plaza. That helped reduce the city's down- town vacancy rate to the mid- to upper teens from the 20s previously, he said. LAWRENCE J. LEVERE, Director of office leasing, Sentry Commercial, Hartford Biggest deal this year: The sale of a 38,988-square-foot building at 151 National Drive in Glastonbury to Winding Brook Capital LLC for $1.2 million. The early '90s were a really slow time for downtown Hartford real estate. Even the impact of the last recession, Levere said, dulls in comparison to the lack of demand in the Hart- ford market in the '90s. "I'm encouraged by the amount of out- of-town interest in Hartford," Levere said. "But I'm interested in how do they see things progressing. Are we headed toward a market that can support new office construction?" UConn's new construction downtown technically is office space, just not new "spec'' office space, he said. "The biggest, most obvious thing is resi- dential," he added. Removing older, Class B and Class C office space from the market by converting it to housing has lowered the city's stubbornly high office vacancy from the mid- 20s to the teens. More feet on the street downtown means Hartford today is less of a 9-to-5 city and more round the clock, Levere said. Because of that, he says he sees potential for pulling more retailers into downtown. Ditto with the arrival of the Yard Goats minor-league baseball team that will occupy the stadium being built in the Downtown North quadrant, by spurring fans to linger downtown before and after games. His biggest concern "is the lack of new office product in this market." When out- of-town brokers visit Hartford on behalf of prospective tenants, they ask, "What's new?" "There's been new retail. New industrial. There's been new office, but it's medical and suburban,'' Levere said. CHRISTOPHER E. OSTOP, Executive vice president, Jones Lang Lasalle, Hartford Biggest deal this year: August's $71.1 million sale of six buildings in downtown's Constitu- tion Plaza. The lending mar- kets right now are wide open for Hart- ford, Ostop says. Lenders, he says, are giving great loan terms. However, lenders are paying closer attention to loan-to-value ratios in their financ- ing decisions. At one time, it wasn't unusual for financiers to underwrite loans for more than 80 percent of the real estate securing the loan. Not so this time. "The pendulum hasn't swung all the way to stupid again," Ostop said. Resonating right now is a growing sentiment 8: Hartford's realty has turned the corner Joel S. Grieco Andrew D. Filler Christopher E. Ostop Lawrence J. Levere If each had one wish … The Hartford Business Journal offered each broker one wave of a magic wand, to be granted the one action each was certain would benefit them, their clients and the Greater Hartford community. Jay Wamester, Colliers: "To make Connecticut more pro-business. This is a very difficult state to do business in. We hear it all the time. This is not a state busi- nesses are looking to come to grow." John McCormick, CBRE: "If there was some way to control our higher cost of doing business, that would pay dividends to our employment sector.'' Mike Puzzo, CBRE: "Creation of a world-class rapid-transit system that would connect us to New York City and Boston. What if you were able to get on a train and get to Boston? You'd potentially have companies in Boston that would consider locating to Hartford. That would be a potential game changer." Tom York, Goman+York: "Right now, [economic] growth is ane- mic at best. I'd change the dynamic that's creating that anemic growth." Singling out the high cost of state and local taxes, utilities and other energy sources, and regulatory red tape, York said, "You put that all together, what do you expect the result to be? Chris Ostop, Jones Lang Lasalle: "High-speed rail, connecting Hartford to New York City. Overnight, New York City-based companies can compare the dramatically lower real estate costs in Greater Hartford as a truly viable option for some or all of their operations." Joel Grieco, Cushman & Wakefield: "I would cut the size of Connecticut government in half. The rest would hap- pen on its own." Andy Filler, Avison Young: "It would be to have our state govern- ment be more pro-business and/or busi- ness friendly.'' Larry Levere, Sentry: "Bring back the Whalers. First of all, I love hockey. Second, Hartford in the late '80s was absolutely booming. You'd go out to eat after work and go to the [Whalers] game. There's something about major-league sports in Hartford that was a lot of fun." Sentry's impending relocation of its downtown office into space above Mckin- non's Irish Bar on Trumbull Street, closer to the new ballpark, is appealing, he said. "I could see going down [to Mckinnon's] for a beer and a burger, then walking over to the ballgame; inviting a client over.'' — Gregory Seay ▶ ▶ ' Hartford for the last 20 to 25 years has been an office park. It's a nice office park. But it's an office park that happens to be the Capital City. Now Hartford is becoming a city destination, with apartments, shops, restaurants.' Christopher E. Ostop, executive vice president, Jones Lang Lasalle, Hartford

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