🔒Travelers Cos. to cede 150,000 sq. ft. of leased downtown Hartford office space

Uncertainty continues to plague the downtown Hartford and regional office markets as highlighted by two recent deals.

No sooner had Sun Life Financial said it was moving 300 of its employees into 47,000 square feet inside the Gold Building — a major win for the center city — when Travelers Cos. notified landlords that it would be giving up most or all of its leased space in the Gold Building and State House Square.

In all, Travelers plans to cede about 150,000 square feet of leased space in the city — about 100,000 in the Gold Building, at One Financial Plaza — a move that will increase downtown’s office vacancy rate, sources familiar with the situation told HBJ.

The good news is that Travelers won’t be shrinking its downtown employee count; it’s simply consolidating office space into properties it owns, according to Travelers spokesperson Kate Thermansen.

She said the move is expected to impact about 1,000 Travelers employees assigned to the Gold Building and State House Square who have been working remotely throughout the pandemic.

Once the public health crisis lifts, those employees will return to Travelers’ two owned corporate buildings downtown — including the iconic Travelers Tower — that have been undergoing substantial renovations in recent years.

“We will not be moving any jobs out of downtown with this consolidation of space and will continue to have more than 6,000 people based in Hartford,” Thermansen said.

Travelers said it will try to sublease its vacant office space. Its State House Square lease runs through June 2025. Information on when its Gold Building lease expires was not immediately available.

Vacancy rates are up

The COVID-19 pandemic has increased vacancy rates in Greater Hartford’s office market to highs not seen in years.

According to brokerage firm CBRE, Greater Hartford’s office vacancy rate hit 20.1% at the end of 2020, the highest in over a decade. But the vacancy rate has held steady since then, increasing only slightly to 20.3% at the end of the second quarter of this year.

The region actually experienced an increase in second quarter lease absorption to 126,864 square feet, meaning more space was leased than abandoned. That brought the year-to-date absorption to a positive 102,715 square feet, CBRE said.

In downtown Hartford, the central business district’s second quarter office vacancy rate actually declined slightly to 19.5%, with tenants absorbing 117,893 square feet of space.

Still, the moves by Travelers and Sun Life show how COVID continues to cast a shadow over the downtown and Greater Hartford office markets.

“The main impact of COVID is still primarily indecision,” said Chris Ostop, managing director of Jones Lang LaSalle in Hartford. “A lot of companies are still kicking the can, especially with the delta variant, trying to figure out what the future workplace will look like.”

“A lot of us thought we would be beyond this right now — a lot of people, not just brokers — but we’re trying to make the best of it,” said Andrew Filler, principal for Avison Young in Hartford. “There are deals getting done.”

The fact that commercial office leases often run for five years or more means that the pandemic’s true impacts — however mild or severe they end up being — won’t be fully measured for some time, Ostop said.

Filler said he is seeing more tenants in downtown Hartford renewing leases for three to five years, as opposed to the one-year leases that became more common last year.

“What I am seeing is people are doing deals, but they’re looking hard at their space,” Filler said. “With this new hybrid workplace strategy, people are looking at trying to utilize less space.”

Sun Life, for example, is trading about 100,000 square feet it currently leases in Windsor at 175 Addison Road, for less than half of that space in the Gold Building.

‘A great centralized space’

The Sun Life move comes with a caveat: Employees will not have to come to the office everyday. Instead, Sun Life views the office as a “magnet,” a place where employees will want to come to collaborate with their colleagues, said company President Dan Fishbein.

“Especially for us, but I think for most businesses, coming into the office five days a week is a thing of the past,” Fishbein said. “The way we’re approaching future work is that people will have a choice to use the office as a resource when that makes sense, or to work from home when that makes sense for what they’re doing that day.”

The CBRE report said demand for office space has been significantly impacted by the pandemic, noting that most employees have been working from home since March 2020, and many large companies in Hartford are uncertain of a return date.

Major corporations, like Travelers, The Hartford and even smaller employers like investment manager Conning, publicly announced they were pushing back their September return-to-the office dates in light of the delta variant’s spread.

“As a result, Greater Hartford has seen considerable downsizing across the office market, as tenants continue to move out of their unused space,” the report said.

Still, Fishbein said Sun Life chose Hartford for several reasons, including its downtown location, which he sees as a reason for employees to come to the office.

“We want it to be a great centralized event space that people will want to come to and that’s convenient for our people as well as clients and business partners, so people will think of the office a little more as a destination as opposed to a daily place they commute to,” Fishbein said. “And this location is really great for that. It’s filled with amenities, it’s an exciting vibrant area, easy to get to with great parking.”

The move also allows the company to expand its recruiting efforts.

“We were recruiting from only a part of the area but being downtown puts us right in the middle,” Fishbein said. “So now we can recruit from all four directions and not just largely from north of the city.”

The Gold Building recently scored another win: Assured Partners, which acquired People's United Insurance Agency in 2020, announced it would re-sign its lease in the office tower and increase its footprint (from 10,000 to 17,000 square feet) with plans to move additional employees to Hartford from its current location in Rocky Hill.

Both leases could indicate employers with suburban offices see downtown Hartford as an attractive location even if they are taking less space. 

Meanwhile, Travelers will move equipment from its leased spaces by the end of the year, Thermansen said.

“We’re nearing the end of a multiyear plan to renovate our facilities to create an even more collaborative environment while making better use of our space,” she said. “As part of that, we’re simply consolidating the small number of floors we lease into the owned buildings of our main campus.”

The challenge with Travelers subleasing, said David Jakubowksi, property manager of the State House Square office complex, is that he’s now competing with a tenant to lease space.

“They have to sublease and I have vacant space in my building,” he said.

‘Build some momentum’

While some of downtown Hartford’s major employers continue to allow full-time remote work, other businesses want a return to the office.

“Outward facing companies — financial services, law firms — want to be back in the office because they understand the benefits,” Ostop said.

Motivation and company culture improve in a group setting where ideas can be easily shared. So why is there so much uncertainty about office space?

“Many of the jobs the larger corporations have downtown can be done remotely and more divisions within those companies are embracing remote work,” Ostop said.

But many of these businesses still want to maintain a downtown presence so perhaps the lease they have for 100,000 square feet is renewed at 50,000 square feet because fewer people use the office everyday.

“So that not only impacts the building, it will dramatically increase the vibrancy of downtown, which is at a critical tipping point right now,” Ostop said. “Suburban Hartford firms like Sun Life were starting to buy into the idea that being downtown may attract young talent. We need to make sure that story continues.”

Filler agreed.

“I’m hopeful that with Sun Life we can build some momentum and maybe get someone else’s attention,” he said.