When Robert Laraia’s wealth management firm, NorthStar Wealth Partners, grew too big for its Newington office space in 2008, he searched several nearby towns and cities for a new home.
Downtown Hartford was in the mix, but Laraia and his team eventually settled on space at West Hartford’s Town Center office building on South Main Street, located near Blue Back Square and West Hartford Center.
Laraia said the town’s affluent demographics and the buzz created from the vibrant retail and restaurant scene nearby made the location attractive.
“We saw a lot of upside in growing our business here,” said Laraia, who also lives in town. “It’s really the address to be.”
While many of Greater Hartford’s cities and towns continue to struggle with high office vacancy rates, West Hartford has been a bright spot in the market, largely maintaining its ability to attract and maintain tenants at a time when many employers have pulled back on office space in recent years.
The office vacancy rate in Greater Hartford stood at nearly 22 percent at the end of 2011, according to realty brokerage firm CBRE-New England, but in West Hartford only 7 to 9 percent of office space stood empty.
Tenants are also willing to pay a premium to be there. West Hartford’s Class A office rents exceed $30 per square foot and the Class B rates are typically above $23 per square feet, CBRE data shows.
By comparison rental rates for Class A office space in downtown Hartford, the state’s Capital City, are between $21 and $24 per square foot.
Realty experts say West Hartford has developed into a micro-cluster for high-end financial services and law firms that have found it necessary to be there to compete for talent and clients.
But future growth in the market will likely be difficult. With an already limited stock of Class A office space, room for building new office structures is scarce and could hinder the town’s ability to take further advantage of its attractive market space.
“The availability of space is extremely limited,” said Rob Rowlson, West Hartford’s director of community services. “Virtually nothing is available in downtown.”
Rowlson said West Hartford’s office market has been aided by the town’s thriving retail and restaurant activity, which got a major boost in 2007 with the opening of Blue Back Square. That nearly $200 million development along with West Hartford Center has created a destination where people can “live, work, eat, drink, shop and play,” an atmosphere downtown Hartford has been trying replicate for some time.
The demographics also make it attractive. West Hartford is, and is surrounded by Greater Hartford’s wealthier suburbs, making the area a popular destination for law firms and financial services companies that cater to the high-net worth individuals.
That is what attracted Paul Bourdeau’s estate planning law firm, Cummings & Lockwood, to Blue Back Square in 2007.
Bourdeau’s firm, which occupies 11,000 square feet in the The Lexicon building, was Blue Back’s first tenant, and he said the location fits perfectly with the high — end clientele they serve, mainly individuals 50 years of age or older who live in West Hartford or the three surrounding towns of Avon, Simsbury and Farmington.
“We find that clients love to schedule an appointment and then go shopping and have lunch or dinner afterward,” Bourdeau said. “That makes the location attractive.”
Accessibility is also part of the equation. Bourdeau, whose firm moved out of Hartford about 10 years ago, said parking is not a problem for his 18 full-time employees or for clients who visit his office.
Tom York, of Goman + York, the office leasing agents for Blue Back Square, said one of the reasons tenants will pay a premium to be in West Hartford is because office space is limited, creating a short supply for an in-demand market.
York estimates that there is only about 800,000 square feet of Class A and B office space in West Hartford’s downtown area. That includes four Class A buildings (The Rutherford, The Lexicon, 62 Memorial at Blue Back, and Town Center on South Main St.) that total 326,800 square feet.
The rest of the market is Class B office space that includes small converted houses in and around the center within a reasonable walk.
York said there is about 22,302 square feet of available office space in the downtown area, which would put the vacancy rate at around 7 percent.
By comparison, the Greater Hartford suburban west market, which includes West Hartford, Farmington, Avon and Southington, had a Class A vacancy rate of 22.6 percent at the end of 2011, the highest vacancy rate that region has seen in over a decade, according to CBRE.
Farmington and Southington have been hit particularly hard as a result of The Hartford Financial Services Group exiting leased space in both towns.
And although leasing activity has been slower in recent years, York said West Hartford is having a much better time retaining and attracting tenants than their neighbors.
York, for example, recently arranged a lease at Blue Back Square with Jade Marketing Group for about 12,000 square feet, which will bring the property’s original 92,000 square feet of professional office space, not including medical, to 100 percent occupied.
U.S. Trust and Merrill Lynch also recently renewed leases at Town Center for 12,000 square feet and 8,400 square feet respectively. All three tenants paid in excess of $30 per square foot, CBRE data shows.
“The reason it is the most prestigious market is because of the unique ambiance created by dynamic mixed-use environment which simply doesn’t exist outside of the Center,” York said. “For office users, it’s more of a lifestyle choice than simply buying or leasing office space.”
But expanding the office space supply in town to meet future demand will be no easy task, realty experts say.
An already low vacancy rate and lack of available land near the downtown area creates a significant barrier to entry. That could prevent the town from further capitalizing on its lure, especially as the economy continues to improve and employers regain an appetite for taking on more office space.
Rowlson, the community development director, said the limited inventory makes it difficult to accommodate prospective tenants demanding more than 20,000 square feet of office space.
He said there are some opportunities to redevelop underutilized buildings in the area, but that likely won’t happen in the near-term because financing such projects remains difficult.
Connecticut landlord Leonard Udolf did recently pay $2 million to buy the building at 102 LaSalle Rd., which has long served as a U.S. Postal Service branch.
Udolf said he plans upgrades to the building’s façade and will repave the adjacent 60-space parking lot. The building will also make room for a new Rockville Bank branch.
But while there is always talk in town about new housing, residential and office developments, nothing is likely to break ground in 2012, Rowlson said, although there will be some more discussions this year.
There is hope of bringing a hotel to the area sometime soon, he added.
