The state’s proposed plans to buy two major office buildings and relocate thousands of state workers to downtown Hartford is nearly certain at this point, but the major unanswered question is which agencies will be asked to make the move.
State officials are staying tight lipped about the subject, which could be politically sensitive, especially if employees of state agencies from outside the Capital City are transferred downtown, leaving vacant office space in nearby cities and towns.
Sources familiar with the state’s thinking say final decisions still have not been made. Sources told the Hartford Business Journal that representatives from several unidentified state agencies have been touring Connecticut River Plaza to see if that office complex fits their needs.
The state’s overall plan is to consolidate up to 20 leases into state owned property as a way of saving money on real estate costs, sources say. It’s a strategy that has been in place since Gov. Dannel P. Malloy took office in 2011.
The state has already agreed on an undisclosed price to purchase the 556,000-square-foot, class A Connecticut River Plaza office complex and is also close to a purchase agreement on The Hartford Financial Services’ office building at 55 Farmington Ave., sources say.
Jeffrey Beckham, a spokesman for the state Department of Administrative Services, which handles the state’s real estate, said his agency “is not in a position to comment on any acquisition of property until a sales agreement is concluded.”
A HBJ examination of state real estate records shows that 1.3 million square feet of office space used by the state is under leases that have or will expire by the end of 2014. The state pays about $20.1 million annually for those combined leases, records show.
In Hartford, about 18 leases are set to expire by the end of 2014. Those leases encompass 259,641 square feet of space that the state pays about $3.7 million for on an annual basis.
Meanwhile, there are 60 or so leases the state occupies under month-to-month contracts, which means the government can exit those commitments at just about any time.
There is no consensus within the realty community about which agencies will be moved to downtown, but there is some speculation.
Potential targets, sources say, include the departments of Revenue Services, Social Services, and Emergency Services and Public Protection which are all housed in an office building outside downtown at 25 Sigourney St. Last year, the state shut the enclosed parking garage attached to that office tower, citing worries about the potential for injuries and damaged vehicles from the crumbling concrete in the superstructure. That building was purchased by the state for $43 million in 1995, and although the movement of that agency wouldn’t eliminate a lease, it would help the state get out of a facility whose structure is suspect.
Realty sources say another potential relocation candidate is the Bureau of Enterprise Systems and Technology (BEST), which is part of the Department of Administrative Services. BEST, which is the state’s IT department, is located at 101 East River Dr. in East Hartford, an office building owned by Fremont Riverview LLC, state records show. The state has two leases at the building for nearly 200,000 square feet that are due to expire in October 2015, state records show. The state pays about $5 million annually to occupy that building.
Meanwhile, the state Department of Banking pays $711,000 annually on its 30,000-square-foot lease in Constitution Plaza in downtown Hartford. That space is on a month-to-month contract.
The state pays about $588,000 for six separate leases — all due to expire by the end 2014 — at a smaller office building at 999 Asylum St. in Hartford. The 34,000 square feet of space held there is occupied by various agencies including the Connecticut Workers’ Compensation Commission and Office of the Child Advocate.
Also in the Greater Hartford suburbs, the state has leases set to expire by the end of 2014 in New Britain, Rocky Hill, Wethersfield, Bristol, West Hartford, Middletown, and Manchester, state records show.
The strategy to buy and occupy state owned real estate has been a directive of the Malloy Administration to try to reduce the state’s real estate costs. Last year state lawmakers approved $180 million for DAS to acquire, repair and improve state buildings and grounds, records show.
Members of DAS are working with the State Properties Review Board and the Office of Policy and Management Asset Management unit to identify available state owned space that may be utilized in place of leased space, officials say.
Targeting building purchases in the Capital City is also being done to try to breathe fresh life into downtown Hartford, which continues to experience high office vacancy rates.
Downtown Hartford’s Class A office vacancy rate was just under 26 percent at the end of 2012, remaining relatively stable from a year earlier, according to CBRE/New England.
If the state goes through with its purchases of Connecticut River Plaza and 55 Farmington Ave. as expected, it would lower the central business district’s vacancy rate from 26 percent to 17 percent.
It would also add 2,500 new workers to downtown.
According to Connecticut’s master facility plan for 2011 to 2016, 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.
Although real estate is not considered a core competency of state government, Connecticut is a major landlord. As of June 30, the state owned 59,666,692 gross square feet of space in 3,780 structures, records show.
The largest single category of building space is educational facilities, with a total of 31.2 million gross square feet. That includes buildings owned by the University of Connecticut, the community-technical colleges, and the Connecticut State University System.
Meanwhile, the state leases 2.6 million net usable square feet of space distributed through 137 leases for office space, warehouse space, academic space and parking lots.
