A pair of West Hartford investor-developers recently paid $3.8 million for a 27,114-square-foot office building less than a mile from the town center.
The purchase of the 1966-vintage AAA Club Alliance building at 815 Farmington Ave. is another sign of an unusually strong office market in and around West Hartford Center, in contrast with much of Connecticut.
Real estate investor David Raisner, who bought the three-story brick building with Ronald Webber, said he was attracted to the property’s location on a central artery in a relatively affluent town, as well as the familiarity people already have with the address. Many have visited the property over the years for passports, drivers’ licenses and other services through AAA, he noted.
The strength of the town’s office market was another big factor.
“The market is extremely strong in West Harford,” Raisner said. “There are not a tremendous amount of vacancies. And there are some great corporations who have been attracted to everything West Hartford offers.”
Chris Ostop, a managing director at real estate services firm JLL, represented AAA in the sale. He said the deal is another example of West Hartford’s strong office market, supported by the densely populated suburb’s highly educated workforce.
AAA occupied only the ground floor and is not in the business of being a landlord, Ostop said. AAA is leasing back the ground floor, allowing the organization to maintain its longtime branch while the new owners lease the two upper floors.
“It’s a terrific transaction and AAA is happy to be a tenant in West Hartford,” Ostop said.
Finding a unicorn
West Hartford’s office market has rebounded from the pandemic, aided by demand for space near the town center’s shops, restaurants and other amenities, experts say.
West Hartford has about a 3.9% office vacancy rate as of the third quarter, down from 10.1% in 2022 and 6.8% in 2019, according to real estate data firm CoStar. The town has roughly 2 million square feet of office space and recorded about 57,000 square feet of net absorption over the past year, meaning more space became occupied than was vacated.
By comparison, the nearly 27-million-square-foot Greater Hartford office market had an 18.5% vacancy rate at the end of June, according to Cushman & Wakefield’s second-quarter report. The rate was even higher in Hartford’s central business district, where 25.1% of office space was vacant.
Greater Hartford lost about 17,600 square feet of occupancy during the first half of the year. Downtown Hartford alone lost nearly 19,500 square feet, with gains elsewhere partially offsetting that decline, the report shows.
Two recent property sales further illustrate the divide between West Hartford and downtown Hartford.
The 23-story, 420,000-square-foot Stilts Building in downtown Hartford, which was facing foreclosure and had a 55% vacancy rate, recently sold to a group of investors for $8.25 million, or roughly $20 per square foot.
By comparison, the AAA office in West Hartford, located about 4 miles away, traded for about $140 per square foot.
Real estate experts caution that the comparison is not apples to apples, given the differences between the properties and the broader markets. Downtown Hartford has more than 8 million square feet of office space, about four times West Hartford’s inventory.
Beyond property sales, West Hartford’s appeal to major employers was underscored in July, when Fortune 500 company Otis Worldwide announced it will relocate its headquarters from Farmington to West Hartford.
The elevator and escalator manufacturer next year will occupy a 31,790-square-foot space in the 184,995-square-foot Town Center Building, at 29 South Main St.
Finding that much available space in the town center was a bit like finding a unicorn, joked Joel Grieco, an executive director at Cushman & Wakefield. Grieco said he spent more than a year helping Otis search for a smaller, higher-quality headquarters.
The company considered other towns but ultimately chose West Hartford for its walkable center and concentration of restaurants and shops, Grieco said.
“Companies like being there because they can provide their employees with amenities at the doorstep without having to bring those amenities into their space,” Grieco said. “You can walk down the street and there are bagel shops and boutique shops and happy hours and fitness centers around the corner.”
‘Great need’
Grieco cautioned that not every office location in West Hartford is equally attractive. Desirability depends significantly on proximity to the town center.
Mike Mahoney, owner of West Hartford-based real estate services firm RLM Co., said it is difficult to find available office spaces larger than 1,000 square feet within walking distance of the center.
“There is an appetite from bigger companies for spaces of 5,000 to 10,000 square feet, but there is nothing available,” Mahoney said.
Despite the demand, significant barriers stand in the way of new office construction, Mahoney said. There is little available land in the town, building costs have risen sharply in recent years, and banks and other lenders remain wary of financing projects in the broadly troubled office market, he said.
Developers are much more apt to build apartments, which offer quicker and more certain lease-up prospects, as well as a higher per-square-foot return, Mahoney noted.
Office demand in West Hartford is high, and asking rents have climbed about 20% over the past five to seven years to roughly $27 per square foot, compared with $22 across the broader Hartford region, according to CoStar. But that additional rent does not flow directly to owners because maintenance, construction and other expenses have also risen sharply, Mahoney said.
“Rents are good, but if you have to put in $100 per square foot to build and get a five-year lease, those are hard numbers to work out,” he said. “But if you can rent out a one-bedroom apartment for $3,000 a month, you can probably afford to build it.”
Mayor Shari Cantor said West Hartford lacks enough office space to meet demand from companies interested in relocating to the town.
Office demand has climbed to the point that some developers who had considered converting properties into apartments are now weighing office projects instead, Cantor said. She declined to provide details before developers formally submit proposals.
“There have been a couple developers looking at repurposing other buildings who are saying: ‘There is a great need for office, and maybe we do not need residential as much as we originally thought,’” Cantor said.
West Hartford Economic Development Director Kristen Gorski said discussions about new office projects remain in the early stages, but the town could receive proposals next year.
“If you asked that question two or three years ago, I would have said you are crazy,” Gorski said of the potential for new office development. “But when you see occupancy rates that are almost unheard-of, there has certainly been a shift. West Hartford has been the market that’s been able to rebound from the pandemic and build back stronger than before the pandemic.”
A good bet
Raisner and Webber’s purchase of 815 Farmington Ave. already appears to be paying off.
AAA is leasing back the ground floor and has continued providing services without interruption. The new owners have also recruited Collins Medical Associates — a multispecialty primary care group serving Greater Hartford and central Connecticut — to occupy the top two floors.
Raisner is the landlord for several of Collins’ medical offices. The move will allow the group to consolidate several smaller locations — many within a mile of 815 Farmington Ave. — into a larger, more connected space, according to Collins.
Connecticut Breast Imaging has also agreed to co-locate in the building. The new location will provide room for Collins to grow and add staff and services over time, the organization said.
