LOST IN SPACE
Greater Hartford offices have enough square feet available to lease to fill Westfarms mall 5 times. That could affect average homeowners.
“We have to keep these buildings from going dark. If we don’t, at some point, our building owners won’t be able to service their debt or pay their taxes.” — David W. Griggs, MetroHartford Alliance chief executive
When ING’s massive Connecticut headquarters in Windsor was built in 2008, it was the largest office construction project in the Hartford area in 20 years, a true trophy building with space for 2,500 employees.
The 460,000-square-foot complex still has that cachet, but in the aftermath of a bruising pandemic that dramatically reshaped how people work — and more importantly, where — the property is now up for sale. ING’s successor, Voya Financial, has embraced the remote workplace and now needs a small fraction of the office space in Windsor.
The complex off Day Hill Road is contributing to a worrisome — and likely, growing — stockpile of available office space in Greater Hartford. A new report Friday by commercial real estate services firm CBRE Inc. showed that office space available for lease in the Hartford area represented more than 27% of the region’s total, encompassing 7 million square feet at the end of the last year.
That’s enough space to fill Westfarms mall more than five times and compares with 23%, or 5.7 million square feet at the end of 2019, prior to the pandemic.
In downtown Hartford, the picture was even more unsettling. Overall office space available for lease was 23%, or 2.2 million square feet, as of Dec. 31, according to CBRE, compared with 18% at the end of 2019. But in the 16 downtown office towers considered prime, top-of-the-line locations, available space topped 34%, or 2 million square feet, CBRE found, at the end of 2022,
compared with 21% just before the pandemic.
There is enough concern that the MetroHartford Alliance, the region’s chamber of commerce, has pulled together a group of urban planners, commercial brokers, state and local economic development officials and others to chart a future for excess office space. Office space is a problem not only in Hartford but in most metro areas across the country as the market struggles to recover from the pandemic.
David W. Griggs, the alliance’s chief executive, said it would be difficult to draw large office tenants from outside the marketplace, given the office downsizings prevalent in most regions of the country.
“We have to keep these buildings from going dark,” Griggs said. “If we don’t, at some point, our building owners won’t be able to service their debt or pay their taxes. So that’s not anything that we want to have. We’re not prescribing any one thing to happen but rather put it all out on the table and also have a regional conversation. What one town or city does affects all the others.”
Economic spin-off
Technology already had cut into space needs for office tenants but the pandemic demonstrated that working outside the traditional office was viable.
The alliance’s group formed last fall with eight members and has now grown to more than 20, Griggs said. Options that have already emerged include housing, hotels, student housing and even museums, Griggs and others say.
Office buildings are a critical part of the economic ecosystem, with companies and their employees paying taxes and contributing to job growth and overall economic prosperity. Those businesses provide a crucial economic spinoff to local restaurants, bars and other businesses. This contributes mightily in building vibrancy, the so-called “feet on street” that conveys excitement.
If offices go unleased, homeowners also could feel the pinch. The value of office buildings depends on rental income. If the income goes down, so can the building’s value, potentially shifting more of the local real estate tax burden to residential properties.
But a move forward will require a bit of threading the needle. Most experts say they believe office leasing will recover but just when or to what extent remains a frustrating unknown. With little office construction in the Hartford area in last two decades, enough office space has to be available for the eventual upturn, uncertain as the timeframe now appears.
“We’re kind of in a wait-andsee,” said Rose Ponte, Farmington’s economic development director and a member of the alliance’s group. “We’re kind of on the runway. Are we going to fly or not?”
Key to those calculations is how remote working shakes out and where businesses see their employees working most efficiently and creatively, Ponte said.
“Uncertainty is something we’re going to have to live with until we see how everything kind of pans out,” Ponte said.
‘Need to be cautious’
While downtown Hartford faces a stubbornly high office availability rate, the city has benefitted from the conversion of hundreds of thousands of square feet of former office space into apartments. But the pandemic still showed the dominance of downtown offices as a driver of vibrancy, even though Hartford has consistently sought to strike a better balance between office and residential in the heart of the city.
Michael Seidenfeld, chief operating officer of downtown Hartford’s largest commercial landlord, Shelbourne Global Solutions LLC, said it is studying the possible conversion of one of its office properties in the city to apartments. Seidenfeld declined to name which one, saying the study was in the early stages. Shelbourne’s holdings include Metro Center, 20 Church St., “the Stilts Building,” and part ownership in the iconic, One Financial Plaza, the “Gold Building.”
“As this concept is prohibitively expensive, this idea is a non-starter unless the city and the state are willing to offer substantial subsidies to make this a feasible option,” Seidenfeld said, in an email.
While downtown housing construction has been a focus, some say it should not be automatically become the “default” in combating a rise in vacant office space. Critically, the addition for more housing will be driven by demand, they say.
“My anxiety is we need to be cautious a little bit that we don’t move too quickly on converting all the best buildings to residential,” said Michael W. Freimuth, executive director of the Capital Region Development Authority, which has helped provide financing for apartment conversions in the last decade and took a role in broader urban planning.
One possibility, Freimuth said, is blending uses, perhaps combining office with housing, hotel or entertainment, as has been done elsewhere, most notably as the AOL/Time Warner building in New York City. Another approach might entail converting smaller, older office structures to housing, pushing tenants into higher quality space with attractive rental rates and landlords eager to sign leases, Freimuth said.
CBRE reported an average asking rent of about $23 a square foot for prime, downtown Hartford office space. That, Freimuth said, compares with closer to $40 a square foot in Stamford.
John M. McCormick Jr., executive vice president at CBRE in Hartford and an advisor to the alliance’s group, said even if tenants are consolidating space, they can help spark leasing momentum as moves to new buildings are accompanied by renovations catering to the emerging hybrid work world. He pointed to the example of insurance giant Sun Life Financial relocating to downtown Hartford from Windsor late last year, with the intent of creating the office of the future.
“You have to look for the little victories, right?” McCormick said. “The singles. The doubles.”
A recent study by security management firm Kastle Systems offered a bit of good news for building owners and downtowns. For the first time since the pandemic, the occupancy of offices in the 10 largest cities nationwide crossed above 50% of the average before the pandemic.
“That’s a good indicator that people are now starting to return to the office, at least to some degree,” R. Michael Goman, principal in Goman+York Property Advisors in East Hartford, said. “But still, you know, 50% is not any number that we should be high-fiving about. I think we’re going to see that for an extended period of time.”
Moving the needle
In Windsor, 20 miles north of downtown Hartford, the town has not only seen the Voya Financial headquarters come up for sale but the Windsor campus of the Hartford Financial Services Group. In announcing their plans, The Hartford said it would transfer hundreds of its employees from Windsor to its Hartford campus, as the property-casualty giant adopted a hybrid workplace model.
The Hartford had already downsized in Windsor, leasing space at 1 Griffin Road North to two other tenants.
According to CBRE, half of Windsor’s office space was available for lease at the end of 2022. Windsor isn’t alone in rising levels of office space in the market north of Hartford. Bloomfield, Enfield and Windsor Locks are in a similar position.
Unlike office buildings in downtown Hartford, the structures in Windsor, such as The Hartford and Voya properties, aren’t suited to housing.
“It really does lend itself to more headquarter-related company looking at it,” Patrick McMahon, Windsor’s economic development director and a member of the alliance’s group, said “Our challenge is going to be finding users of bigger blocks of space. A 20,000-30,000 square foot move from one suburb of Hartford to another suburb or from Hartford to another suburb, that’s not going to move the needle.”
McMahon said the area needs to build on job growth or find tenants “from the Boston or New York market or even the European market to fill some of this space. For now, we’re taking a cautious approach. The pandemic, we’re just kind of getting over it, and we want to approach this in a logical way.”
Here is a sampling of seven office buildings and complexes in Greater Hartford that illustrate examples of large blocks of space available for lease. Available space can include both unoccupied space and space that a tenant is trying to sublease.
1. The Atrium at Gillette Ridge, Bloomfield
Address: 1300 Hall Blvd.
Year built: 1983
Size: 548,000 square feet Available / Percent of total: 259,000 square feet / 47%
Owner: The Atrium CT
The details: This massive office complex was built for insurer Cigna and later purchased by MetLife. The complex is now under new ownership and partially leased to several companies. New owners have invested millions in renovations and beefed up amenities to include a game room, golf simulator and outdoor fire pits.
2. One Commercial Plaza, Hartford
Address: 280 Trumbull St. Year built: 1983
Size: 675,000 square feet Available / Percent of total: 379,150 square feet / 56%
Owner: Grunberg 280 Trumbull LLC
The details: Large blocks of space opened up after financial services giant Prudential sold its retirement business to Empower in 2022. Law firm Robinson+Cole also has announced relocation to One State Street in downtown Hartford, leasing 75,000 square feet.
3. Trumbull Place, Hartford
Address: 242 Trumbull St. Year built: 1920; renovated and expanded in 1986
Size: 310,000 square feet Available / Percent of total: 157,540 square feet / 50%
Owner: Northland Trumbull LLC
The details: Northland Investment Corp put the building at the corner of Trumbull and Pratt streets up for sale last year. Floors 3-8 will be largely vacant after Day Pitney relocates to Goodwin Square in downtown Hartford in October, 2023. Street-level retail spaces, many of which had stood idle for years, were leased with the help of the Hart Lift city storefront subsidy program.
4. CityPlace I, Hartford
Address: 185 Asylum St.
Year built: 1980
Size: 786,000 square feet Available / Percent of total: 562,380 square feet / 71%
Owner: RP Asylum LLC
The details: In the fallout from the pandemic, insurer UnitedHealthcare, a major tenant at Hartford marquee downtown office tower, downsized to approximately 60,000 square feet as employees moved to working partor full-time at home.
5. CityPlace II, Hartford
Address: 151 Asylum St.
Year built: 1989
Size: 292,000 square feet
Available / Percent of total: 151,000 square feet / 51%
Owner: CityPlace II LLC
The details: Several consolidation and/or mergers have impacted building occupancy rates. Harvard Pilgrim relocated to Rocky Hill as well. Anchor tenants include Arch Insurance, Webster Bank and Merrill Lynch.
6. Voya Financial Headquarters, Windsor
Address: One Orange Way Year built: 2008
Size: 461,000 square feet Available / Percent of total: 461,000 square feet / 100% Owner: Voya Financial
The details: Voya Financial put its headquarters up for sale in August. Hybrid work will allow them to downsize to approximately 80,000 square feet.
7. The Hartford Financial Services Group, Windsor
Address: 1 Griffin Road North
Size: 445,675 square feet
Year built: 2009
Available / Percent of total: 343,169 square feet / 77%
Owner: The Hartford Financial Services Group
The details: The Hartford announced in 2022 relocating employees from its Windsor campus to the insurer’s Hartford headquarters and the insurer is now marketing building for sale. A portion of the building is leased to Aflac and Waste Management.
SOURCES: CBRE, MetroHartford Alliance, City of Hartford Assessor