Hartford Business Journal

www.HartfordBusiness.com October 26, 2015 • Hartford Business Journal 15 that downtown "has never been better.'' "Hartford for the last 20 to 25 years has been an office park," Ostop said. "It's a nice office park. But it's an office park that hap- pens to be the Capital City. Now Hartford is becoming a city destination, with apartments, shops, restaurants. What we didn't have before was that story, the incredible story of what has happened to downtown Hartford. The story wasn't as prominent as it is now.'' JAY R. WAMESTER, Principal/Hartford manager, Colliers International Biggest deal this year: $17.6 million online auction of 30-story downtown Hartford skyscraper Goodwin Square and companion 124-room luxury hotel. For the first time in his 28 years as a broker, and particu- larly the last 24 to 36 months, Wamester said "we're seeing more suburban tenants asking about space downtown.'' "Hartford will never be a 24-hour city, but hopefully it can be an 18-hour city," Wame- ster said. The latest round of Hartford gun violence, albeit in neighborhoods outside downtown, makes downtown tenant prospects wary, he added. Wamester said he's always done a lot of dis- tressed-property work for servicers and banks. In the early '90s, he collaborated with the Federal Deposit Insurance Corp. to manage and/or sell off foreclosed properties and other realty-loan collateral seized in bank failures. Wamester said he wonders how the recent buyers of the 100 Pearl St. skyscraper, who paid about $130 a foot for a building in a mar- ket where office rents average $22 a foot gross, will earn a decent return with such a gulf between available rents and the debt service. "The challenge is we've never had any appreciation." he said. "The buildings' values haven't gone up. In many cases, buildings are selling for less than what the previous buyer paid. That's the play in Hartford — to buy buildings cheap.'' THOMAS D. YORK, Principal, Goman+York Property Advisers, East Hartford Biggest deal this year: A 42,391-square-foot, three-year lease at 275 Asylum St. in down- town Hartford (home to High School Inc.) In the mid-'90s, Hartford's then- slumping realty mar- ket recovered, but the trough it came out of wasn't "remotely close to the conditions we previously had,'' he said. Institutional growth by insurers The Hartford, Aetna and Travelers, along with the "dot-com" technology boom contribut- ed to some of downtown Hartford's office space growth in the mid-'90s. Simultane- ously, smaller corporate and retail tenants signed up for space based on optimistic business projections, York said. When the next market dip occurred after the Sept. 11 tragedy in 2001, those projections failed to materialize, forc- ing many of those same tenants to close doors or sharply cut back on overhead, including the amount of leased space. In addition, large corporate users of office space, some of it in buildings they owned, was vacated and left to sit empty. York calls it "shadow space." By the mid-2000s, a demand pickup ate into Hartford's shadow-space inventory. "I'd say that's been pretty well resolved,'' York said. JOHN M. MCCORMICK JR., Executive vice president/partner; MICHAEL S. PUZZO, First vice president/partner, CBRE-New England, Hartford Biggest deal this year (both brokers involved): In downtown Hartford, the $37 million sale of 100 Pearl St. McCormick and Puzzo offered con- trasts in past recessions' impact on the Hartford region's real estate. "Each previous recession has been a little different,'' McCormick said. "In the early '90s, it was the first time banking, insurance and defense were all down at the same time. Obviously, that was 100 percent of our marketplace.'' Puzzo says layoffs in this last downturn were more concentrated on banking and insurance. Also, Greater Hartford's popu- lation growth has been stagnant during the same period. The central region's base of local produc- ers and service providers are doing well right now, both agree. But Puzzo adds, "We just haven't seen that robust hiring come back.'' One big change they say they've noticed among prospective office tenants is a reluc- tance to take on more space than they abso- lutely need at the moment. That is holding back the refilling of much of the empty down- town and suburban office, retail and indus- trial spaces, McCormick and Puzzo said. "Tenants are doing more with less,'' Puzzo said. "They're restacking themselves within their owned or leased space. The good news is they've restacked themselves for the long term. But the bad news is these space contractions tend to be permanent.'' McCormick predicts the new downtown ballpark, UConn and Trinity coming into the center city, and creation of new apart- ments downtown will improve demand for retail and office space. In addition, land- lords are certain to see more opportunities to firm up rents and renegotiate lease terms and conditions more favorable to them. "We definitely think leasing activity will pick up in the next 12 to 24 months,'' Puzzo said, "as leases mature.'' n Thomas D. York Jay R. Wamester John M. McCormick Jr. Michael S. Puzzo Show your finances who's boss Simsbury Bank Cash Management Solutions To learn more, visit SimsburyBank.com/CashManagement Simsbury Bank's Cash Management Suite gives you the flexibility to simplify and manage the flow of money through your organization. Whether you need to view and conduct business online or are looking for automated financial services, we can offer a comprehensive package tailored to your unique business needs.

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