🔒Amid increasing vacancy rates, Hartford office market prepped for a reset

The reset button has been hit on Greater Hartford’s office market, its corporate employers and governing municipalities.

Hartford, like other similar-sized cities, is dealing with an oversupply of office space post-COVID. The most recent statistics showed that Greater Hartford companies shed approximately 585,000 square feet of office space in the third quarter, with submarket vacancy rates ranging from 20% to 35%.

There are currently more than 20 vacant office buildings in Greater Hartford and some are being repositioned to other uses including multifamily, self-storage, industrial, medical office and other municipal uses.

Several types of hybrid work options have emerged and taken hold over the past two years:

• Traditional in office four-plus days per week;
• Two or three days per week in the office with remainder remote for “heads-down” work;
• Fully remote and only in office for scheduled meetings or training;
• Distributed work where a company has no physical office space, and all employees are fully remote.

Industry types and company size play a major factor in each employer’s decision. Hartford’s largest companies have elected for two or three days in office for collaboration with the remainder of the days remote.

Distributed work is the most drastic and has only been implemented by companies with very few employees, resulting in little effect on the market.

The one constant in all these scenarios is the power of the employee in driving the hybrid agenda. The flexible work schedule has become another item on the menu of employee benefits, such as health insurance and the 401(k).

Despite the shift to hybrid work, the office remains the silent partner in company culture. Today, corporations are seeking amenity-rich buildings or neighborhoods to entice employees back to the office, and “plug-and-play” opportunities to reduce costs and lease terms.

Companies need less physical space and more creative work environments. There have been several major deals over the past year that have reflected these trends:

• Sun Life leased 46,000 square feet, at One Financial Plaza (the Gold Building) in Hartford. This suburban-to-urban relocation from Windsor will allow employees to experience first-class building amenities, a central location, and retail benefits of the city.
• Landmark Partners/Ares Management saw an opportunity in busy West Hartford Center, leasing 21,000 square feet at the Rutherford Building in Blue Back Square. Landmark will relocate from its corporate-owned building in Simsbury.
• United Way of Connecticut will relocate from a Class B office building on the Silas Deane Highway in Rocky Hill, to 41,500 square feet of Class A space at 55 Capital Blvd., also in Rocky Hill. The Silas Deane building is currently awaiting approvals for conversion to multifamily.
• Women’s Health needed a central office location with superior highway access and large, open and efficient floorplates. The company is relocating from Avon to Rocky Hill, leasing 23,000 square feet at 175 Capital Blvd.
• Vixxo looked to the suburbs for its amenity-rich, plug-and-play space, leasing 9,500 square feet at The Atrium in Bloomfield.
• Day Pitney LLP was able to take advantage of a long-term sublease opportunity at Goodwin Square, which provided both a sublease for 36,000 square feet and a direct lease for an additional 6,000 square feet.

Perhaps the most compelling news is that cities and towns are also part of the reset. Greater Hartford municipalities have historically been reactive regarding real estate but now are proactively engaging in plans to improve opportunities for growth and adaptive reuse development.

The Hartford Chamber of Commerce’s Hart Lift program, announced in December 2021, is a good example of proactive government. The Chamber directed $6 million from the American Rescue Plan Act into the Hart Lift Program, which provides incentives to Hartford property owners to help them fill vacant retail storefronts.

The program is adding vibrancy to Hartford’s streets by attracting new residents, businesses and visitors, and has made it possible for startups to afford a brick-and-mortar storefront.

While the grants have been distributed citywide, historic Pratt Street has seen an unprecedented boom with 10-plus new retail leases in the past year.

As we look to 2023, we believe vacancy rates will continue to increase in some cases to historically high levels. Employers will focus on real estate opportunities in vibrant neighborhoods, amenity-rich buildings, and/or plug-and-play alternatives.

John McCormick is the executive vice president and Anna Kocsondy is vice president of commercial brokerage firm CBRE in Hartford.