🔒Hartford’s office market reset will require ‘more patience’ in 2024; vacancies likely to increase

Last year was the 25th anniversary of the original “Six Pillars of Economic Development,” a plan to remake Hartford with major new projects.

The six pillars have all been completed and expanded upon. Why does this matter in today’s office market?

This milestone serves as a reminder of the significant capital invested into Hartford and that these improvements require patience, but over time pay dividends.

The six pillars included construction of the Connecticut Convention Center, Marriott Hotel, Science Center, Dunkin’ Park, Dillon Stadium, UConn’s Hartford campus, and several thousand new apartments, among other projects.

The completion of these developments has sparked additional improvements in the area, including key employers — The Hartford, CVS/Aetna and Travelers — all making multimillion-dollar improvements to their Hartford campuses; increased transit options; and the revitalization of two prominent retail districts downtown, Pratt Street and Front Street.

The city offers employees and employers new amenity-rich residential units and expanded entertainment and retail options, all of which complement Hartford’s thriving arts community and walkability.

Landlords have invested in their lobbies, base building upgrades and the creation of tenant amenities.

Office market update

Hartford, like other similarly sized cities, continues to deal with an oversupply of office space post-COVID.

2023 marked a third straight year of negative absorption, meaning tenants collectively gave up more space than they added.

Downtown Hartford experienced a 35-year-high office vacancy rate of 33.1%. The vacancy rate is expected to increase to 37% next year, with continued negative absorption anticipated.

Nationally, tenants continue to “right-size” in the face of work-from-home options/hybrid work, and are focusing on amenity-rich locations.

Hartford is no exception to these market trends.

Last year did offer some positive signs of expansion and continued relocations to downtown. It was the 10th straight year of urban migration from the suburbs.

• Talcott Resolution moved 300 employees from Windsor to One American Row in Hartford. Talcott leased 52,000 square feet in the “Boat Building” to take advantage of the city’s amenities and add to Hartford’s reputation as one of the premier insurance markets in the U.S.
• After an exhaustive search, Selective Insurance, a tenant in Glastonbury for over 20 years, leased 25,000 square feet at 90 State House Square.

Tenants that expanded in 2023 included two financial services firms and a recruiting firm.

• Gateway Financial more than doubled its space by signing a 10-year, 20,000-square-foot lease at 455 Glastonbury Blvd., in Glastonbury.
• Sky Investment Group, a long-term tenant at One Financial Plaza in Hartford (the Gold Building), recently renewed and expanded, almost doubling its current footprint.
• Talent recruitment firm Aerotek Services expanded at 30 Batterson Park Road, in Farmington, by 7,500 square feet, signing a lease for 18,000 square feet.

Following a national trend, many tenants locally have focused on securing long-term leases while seeking quality and amenity-rich locations.

• Landmark Partners/Ares Capital recognized the dynamic nature of West Hartford’s Blue Back Square and moved its operations in 2023 to 21,000 square feet in The Rutherford Building, at 65 Memorial Road. Previously, Landmark had owned and occupied a building in Simsbury for over 20 years.
• Beazley Insurance will also relocate to The Rutherford Building after almost 20 years at 30 Batterson Park Road, in Farmington. The new lease allowed for a modest downsize, but improved access to retail, shops and dining for the employee base.
• Law firm Day Pitney solidified its commitment to Hartford by relocating from 242 Trumbull St., (recently purchased by Shelbourne Global to be converted into residential units) to Goodwin Square, where it signed a long-term, 42,000-square-foot lease.
• Law firm McCalla Raymer Leibert Pierce relocated within Hartford from Weston Street to 280 Trumbull St., seeking more amenities and the walkability of downtown.

Looking forward to 2024, it will continue to be a “tenant market.”

Employers will focus on real estate opportunities in vibrant neighborhoods, highly amenitized buildings, and/or “plug-and-play” alternatives.

Downtowns and buildings that have planned and made investments will continue to gain the most attention from tenants.

Hartford’s reset is going to require a little more patience, but the developments completed to date have laid the groundwork for a stronger office market going forward.

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

Check out the rest of HBJ's 2024 economic forecast issue