The state of Connecticut has hired powerhouse real estate brokerage firm CBRE-New England to assist its efforts in purchasing a large office building as part of a new long-term strategy to consolidate its leased space holdings into state-owned property, government officials confirmed.
Jeffrey R. Beckham, a spokesman for the Department of Administrative Services, which houses the state’s real estate division, said CBRE was hired for a “one-time real estate advisory project to assist the state in evaluating its real estate portfolio in its continuing effort to reduce costs.”
The state will pay CBRE hourly fees, but not an amount over $200,000, Beckham said.
The hiring signals just how serious the state is with its appetite to buy an office building, a decision that could come by the end of the legislative session in May, sources say.
Last year, the state quietly put out multiple requests for proposals asking Greater Hartford and other Connecticut landlords for offers on buildings with more than 100,000 square feet of space.
Sources say the state has looked at several significant downtown Hartford properties including the 556,000-square-foot Connecticut River Plaza, which is currently undergoing an $8.5 million renovation.
Another possible downtown Hartford acquisition target, sources say, is the former Travelers Education Center building at 200 Constitution Plaza, which recently went on the sales block after being foreclosed by its lender.
CBRE is marketing the vacant 135,000 square foot Travelers Education Center for sale or lease.
CBRE declined to comment on the state’s search for office space.
The state is looking to take advantage of a bearish real estate market that has caused vacancy rates — particularly in Hartford — to increase dramatically, pushing down the value of commercial office buildings.
That’s giving real estate investors — including the state — the opportunity to seek out discounted office space.
But the search for an office building represents more than just a good buying opportunity. It’s part of a long-term strategy by the Malloy Administration to try to reduce the state’s real estate costs by consolidating more expensive leased space into facilities owned by Connecticut taxpayers, officials said.
A transfer of state workers to downtown Hartford could be a significant boost for the city, which has seen its major employers cut back on office space in recent years draining some feet on the street.
That’s had a wide impact on the local economy and driven up retail vacancy rates as well.
If the state does acquire a downtown property, however, it could also cost the city further tax revenue since the state is exempt from paying property taxes. An arrangement could be worked out, sources say, where the state kicks in more money to the city through its payment in lieu taxes.
According to Connecticut’s master facility plan for 2011 to 2016, which was published in July, the state is looking to decrease the amount of square feet leased by all government sectors by 2.3 percent over the next five years from 3,122,602 square feet to 3,049,398 square feet.
Connecticut uses state owned space to meet nearly 96 percent of its total office needs, but pays $62.1 million a year to lease an additional 3.1 million square feet of office space.
Almost 38 percent of those leasehold costs are attributable to the judicial and corrections departments, which includes court space.
The state has 233 leases in force but about 40 percent of them are on a month-to-month basis, which means the state can exit those commitments on short notice, officials said.
