When Hartford-based Lexington Partners LLC began leasing 111 brand new luxury apartments at The Borden in Wethersfield back in early June, Principal and President Marty Kenny knew the timing wasn’t ideal.
Connecticut was less than two months past its presumed peak of COVID-19 hospitalizations, and Greater Hartford apartment properties were suffering to varying extents from sluggish leasing, higher vacancies, construction delays and increases in delinquent rent payments.
But for the second phase of the $32-million Borden project — a development that features community amenities like a rooftop terrace and fire pit, grilling stations, rec room, lounge, fitness studio and TruGolf simulator — things went better than expected, with 90 units leased up in the first four months.
“To be honest with you, I’m an optimistic guy, but I never expected that to happen with virtual tours and just really leasing with one hand tied behind your back,” Kenny said during the annual Connecticut Commercial Real Estate Conference, hosted (virtually) in October by the Greater Hartford Association of Realtors and UConn.
For Kenny, the experience was an affirmation that new multifamily projects that have the right mix of amenities, architecture and visibility, remain a smart development strategy, even amid the many challenges the pandemic has wrought in the market.
“When you have the right product that has the right amenity mix, the demand is insatiable,” Kenny said. “It’s definitely not for the faint of heart, but the bottom line is people need a place to live.”
Hartford County has managed to absorb nearly 6,500 new rental units in the past decade, Kenny said, even though Connecticut’s population has been stagnant over that time.
Some of it has to do with the fact that the region’s rental stock is relatively old, with about 80%, as of 2010, built before 1980.
“While there’s not an influx of jobs coming here to Connecticut, we have an old inventory of apartments,” Kenny said.
Air flow top of mind
Caught flat-footed by COVID-19’s arrival to the U.S. early this year, scientists and health officials have scrambled to better understand the virus.
As that understanding has evolved, it’s become clearer that respiratory droplets in the air, particularly in closed spaces, are likely to be the primary transmission method, rather than contaminated surfaces.
It’s become a factor for commercial property owners, including apartment landlords like Lexington.
Besides The Borden’s overall look and amenities, the Silas Deane Highway development had a new offering this summer to help residents feel at ease with signing a lease.
Kenny said Borden tenants can opt to pay a monthly charge for their units to be outfitted with an air purifying system developed by an Israeli company called Aura Air, which participated in Upward Labs accelerator program in Hartford.
Aura Air, which filters allergens and volatile organic compounds, has also participated in several Israeli product trials, which found the system was capable of filtering pathogens and viruses such as H1N1 and a coronavirus with a particle size similar to SARS-CoV-2, which causes the COVID-19 disease.
It’s just one example of the many ways the pandemic has changed what consumers prioritize.
“Residents used to not care about the quality of air too much, they never focused on it,” Kenny said. “ ‘What’s your HVAC system?’ is not a question we often received. It now matters very much and I think the smart owners of residential property are going to be all over that.”
Mixed-use takes a hit
Over the past 15 years, Lexington Partners has built more than 760 upscale rental units in Greater Hartford such as downtown Hartford’s Trumbull on the Park (now Spectra on the Park), The Tannery and Addison Mill Apartments in Glastonbury, Windsor Station in Windsor, and Mallory Ridge in Bloomfield.
Kenny is also partnering with Laz Parking’s Alan Lazowski and major Hartford landlord Shelbourne Global Solutions on a $100-million mixed-use makeover of downtown Hartford’s Pratt Street commercial corridor, plans for which include 375 apartments and townhomes and 45,000 square feet of retail space.
While the Class A apartment market has held up well this year, mixed-use properties have faced some difficulties, according to Kenny, as some restaurant and retail tenants have been unable to pay rent. Properties that rely on parking revenue have also taken a hit.
“Usually a mixed-use property is a great thing,” Kenny said during the recent real estate conference.
As the economic impacts of COVID-19 continue to play out, he and his Pratt Street partners are tweaking their assumptions about how much leasing demand the various pieces of the project will draw once completed.
“We’ve made our projections for filling that space up in a really conservative manner, because it’s going to be a while for that kind of people-intense retail space to become desirable again,” he said.