As Mayor Luke Bronin looks toward his final year in office — having announced his intention not to run for reelection — he faces another outsized challenge: a hollowing out of downtown Hartford office buildings.
Get Instant Access to This Article
Subscribe to Hartford Business Journal and get immediate access to all of our subscriber-only content and much more.
- Critical Hartford and Connecticut business news updated daily.
- Immediate access to all subscriber-only content on our website.
- Bi-weekly print or digital editions of our award-winning publication.
- Special bonus issues like the Hartford Book of Lists.
- Exclusive ticket prize draws for our in-person events.
Click here to purchase a paywall bypass link for this article.
Hartford Mayor Luke Bronin came into office in 2016 facing a fiscal crisis threatening bankruptcy and a baseball stadium project that, as he describes it, had “gone off the rails.”
As Bronin looks toward his final year in office — having announced his intention not to run for reelection — he faces another outsized challenge: a hollowing out of downtown Hartford office buildings.
“The biggest risk to our tax base going forward and the biggest risk to our fiscal strength is the challenge in the commercial office market,” Bronin said in a recent interview with the Hartford Business Journal. “Those large commercial office buildings represent a significant share of our property tax base and there’s no question that the world of work has changed that. The value of those buildings has already changed as a result.”
The office market is struggling broadly as companies continue to embrace a remote or hybrid work model made popular during the pandemic. That was reflected in the city’s recent revaluation, which saw office values drop amid rising vacancy rates.
For example, the assessed market value of Hartford’s largest office tower, City Place I, sank from $103.4 million in 2020 to $82.3 million in 2021, down 20.4%.
The diminishing corporate presence is a critical concern for Hartford. Not only are office buildings a big part of the city’s tax base, but the corporate workers who inhabit them have formed the base of an economic food chain that has fed city retailers and restaurants for decades.
Bronin’s response to this challenge remains consistent: a continued focus on apartment development, particularly in the downtown.
His administration also funded the Hart Lift program, which provides landlords incentives to outfit ground-floor retail space for new restaurants and other small merchants. The $6.4 million allocated to the program has been fully awarded to 56 businesses, many of which will be located downtown.
“Nobody has a crystal ball, but I think the commercial real estate market is going to be challenged nationally for a number of years,” Bronin said. “The key to ensuring the long-term strength of our commercial real estate market is ensuring the vitality and energy and activity in our downtown. And I think the surest way of achieving that right now is continuing to stay focused on residential development.”
Grim office outlook
The Greater Hartford office market, including the city and surrounding suburbs, shed 1.1 million square feet of office space occupancy in the first three quarters of 2022, according to market research by brokerage firm CBRE.
“Large employers, that have been a stabilizing force in this market historically, continued to make available large blocks of both owned and leased space,” reads CBRE’s third-quarter market report. “Financial and insurance firms across Greater Hartford have made similar decisions as remote and hybrid workforces continue to cement themselves as the new norm.”
In downtown Hartford, companies gave up 255,000 square feet of leased office space in the third quarter of 2022, increasing the vacancy rate to 21%, according to CBRE.
More than a quarter of Class A space is currently vacant, and many think the downtown office vacancy rate will reach into the 30%-range.
Alan Lazowski — head of Hartford-based parking empire LAZ Parking and a key area real estate investor — said Bronin’s early accomplishments, particularly the righting of city finances, made Hartford a place where prudent businesses could invest.
“You have to have a strong base, that’s the first thing he did in promoting economic development and investment,” Lazowski said. “He got the house in order.”
Among Lazowski’s investments is the distinctly hued “Gold Building,” a 621,000-square-foot downtown Hartford office tower he purchased in 2019 for $70.5 million with Shelbourne Global Solutions.
Lazowski quickly moved his headquarters to the building, bringing occupancy to 93%. Now, with Travelers Cos. set to yield eight floors and other tenants retreating, the building will likely be at 75% or 80% occupancy by 2024.
“And we are one of the best buildings in Hartford in terms of occupancy,” Lazowski said. “Very soon we are going to see 2.5 million square feet of empty office downtown.”
Lazowski said he agrees with Bronin’s continued drive to add apartments downtown, and he’s invested in several residential projects that have seen high demand. Lazowski said there is room for several thousand more units, possibly even conversion of one of the city’s large Class A office towers.
That would thin office space downtown and likely drive up occupancy in remaining buildings, he said.
Other developers and brokers have downplayed the possibility of converting Class A office space into apartments without significant government subsidy. Lazowski, however, notes that it has been done before, specifically with the transformation of the 26-story office tower at 777 Main St. in downtown Hartford.
Lazowski said he is also hoping to see state support for some form of financial incentives to bring new office tenants to Hartford, akin to the low-interest loans the Capital Region Development Authority (CRDA) has effectively used to incentivize apartment development.
Lazowski said he is working with executives at Shelbourne — the city’s largest landlord — and other business leaders to develop a proposal for state officials to consider in the new year.
Silver linings
Despite Hartford’s challenges, city business leaders and boosters speak with optimism, often pointing to strong apartment demand as a counterweight to a reduced office presence.
A CRDA program providing low-interest loans has unlocked developments adding thousands of apartments in Hartford. Since the quasi-governmental agency’s launch in 2012, the CRDA has authorized $159 million in loans, leveraging apartment developments worth $658.7 million.
Completed projects have already yielded 2,007 new or refurbished apartments. Pending developments approved for CRDA loans promise another 683 units, with thousands more in the planning stages.
CRDA’s push for downtown housing predates Bronin, but Michael Freimuth, executive director of the agency, said the mayor has been a critical ally. Bronin, a CRDA board member, has also been a strong partner in the creation of a new UConn campus downtown and efforts to foster a medical industry and amplify the budding arts and innovation economy in the city’s Parkville neighborhood, Freimuth said.
Bronin’s support has been a precondition for “dozens” of neighborhood housing developments, and his lobbying has also helped convince state officials to supply needed funding, Freimuth said.
“Where the real impact is, is a lot of politics, moving things through the Bond Commission,” Freimuth said. “The mayor has to be there advocating for a project to move it through the Bond Commission. The quiet, behind-the-scenes work, working phones and moving things through the political apparatus — he’s been a very quiet ministerial deliverer, getting projects through the gauntlet.”
David Griggs, CEO of the MetroHartford Alliance, also praised Bronin’s ability to make a case for the city, particularly in courting companies contemplating a move to Hartford.
“He is always, always available to us,” Griggs said. “If we have a company or site selector coming into town, he is always there, understanding his role and how to execute it.”
