Hartford office market resets as major properties face sales, redevelopment

Three of downtown Hartford’s largest office properties are moving toward potential sales, while a recent tax settlement has further documented the steep decline in commercial real estate values since the pandemic. Constitution Plaza, Metro Center and City Place I — totaling more than 1.8 million square feet of office space — are at various stages of court-supervised sale processes after each property faced financial difficulties tied to weak demand and mortgage debt. At the same time, a judge has approved sharply reduced tax values for properties on Trumbull and Pratt streets whose owners are pursuing office-to-residential conversions and other improvements. Together, the moves represent a potential turning point for a downtown office market where vacancies have remained high since the pandemic, as remote and hybrid work prompted companies to reduce their footprints. The six-building, 662,106-square-foot Constitution Plaza office complex recently hit the market following a $50.8 million foreclosure. JLL is marketing the leasehold interest without an asking price. A leasehold interest gives the buyer control of the buildings through a long-term ground lease rather than ownership of the underlying land. The 6.5-acre complex is 60.5% occupied and includes 1,743 parking spaces in two garages. Occupancy varies significantly among its five office buildings, according to the listing: 1 Constitution Plaza (276,000 square feet) is 49.3% occupied; 10 Constitution Plaza (6,831 square feet) is 94.7% occupied; 100 Constitution Plaza (218,608 square feet) is 88.6% occupied; 248-250 Constitution Plaza (79,426 square feet) is 27.6% occupied; and 260 Constitution Plaza (81,241 square feet) is 52% occupied. JLL Managing Director Chris Ostop said the intention is to sell the property as a single package, although separate bids could be considered if they are assembled into an aggregate deal. The listing highlights Constitution Plaza’s redevelopment potential, noting that current zoning allows multifamily development “as-of-right.” Hartford Mayor Arunan Arulampalam said the city is working with partners to encourage a housing-focused redevelopment of the complex, which was built in the 1960s as a signature urban renewal project. Capital Region Development Authority Executive Director David Steuber said his agency has been involved in conversations with various community stakeholders about the future of Constitution Plaza and stands ready to work with developers interested in repositioning the property. The 6.5-acre complex represents roughly 10% of the city’s vacant office space, he said. Steuber noted that CRDA has helped finance the redevelopment or conversion of several major downtown office properties, including 777 Main St., 55 Elm St. and the recently opened UConn residence hall on Pratt Street. “And so, if there is a developer with a vision for the future of the plaza, we will be available and interested to speak with them,” he said. Bidding process Metro Center, a 12-story, 275,000-square-foot office tower at 350 Church St., is also headed to market amid a foreclosure lawsuit filed by Webster Bank against owner Shelbourne Global Solutions. A judge has approved a sale process with an $18 million minimum qualifying bid. The property, along with an adjacent 1,215-space parking garage, will be marketed through Oct. 30, with bids due Nov. 2. Shelbourne paid $49 million for Metro Center in 2017. A judge who placed the property under receivership last year noted that $34 million remained due on its mortgage and that the building’s value had fallen to $18 million. Meanwhile, eight prospective buyers submitted initial bids in August for City Place I, Connecticut’s tallest office tower. The 38-story, roughly 885,000-square-foot building at 185 Asylum St. is 45.8% leased. Boston-based Paradigm Properties, which paid $113.2 million for it in 2015, turned the property over to a court-appointed receiver last year after acknowledging it could not keep up with its mortgage debt. The receiver is expected to seek court approval if the bidding process produces an acceptable offer. New valuations The recent sale of another prominent downtown office tower illustrates how sharply downtown office property values have fallen. A partnership led by LAZ Investments paid $8.25 million in August for the 420,000-square-foot Stilts Building at 20 Church St., resolving a foreclosure case that began in 2022. The sale price was about 81% below the $44.4 million the building fetched in 2014. The 23-story tower was 55% vacant at the end of June. The new owners have said they plan targeted amenity upgrades and tenant improvements aimed at increasing occupancy. The decline in property values is also playing out in tax appeals. On Sept. 8, Superior Court Judge Matthew J. Budzik approved a settlement reducing the assessed values of office and retail properties at 218-260 Trumbull St. and 42 Pratt St. by more than one-third. The value of the larger Trumbull Street building will fall from $6.34 million to $4.01 million, while the Pratt Street property’s value will decline from $3.78 million to $2.43 million. Hartford must refund property taxes paid based on the higher valuations. Unlike the properties in foreclosure, however, the complex on Trumbull and Pratt streets is undergoing a significant redevelopment. Shelbourne and its partners, Lexington Partners and Hartford entrepreneur Alan Lazowski, recently completed a $28.9 million conversion of four floors at 42 Pratt St. into housing for 202 UConn students. Lexington Partners President Chris P. Reilly has also said he expects to advance plans this fall to convert the larger Trumbull Street building into at least 145 apartments.