NORTHEAST SNAPSHOT, AUGUST 2007
Hartford, Connecticut Office Market
In Hartford, large corporations are driving much of the development of new office space in the area for their own use. ING Group is nearing completion of a 475,000-square-foot office property on Day Hill Road in Windsor. The company is currently located in Hartford on Aetna Life & Casualty’s campus at Farmington Avenue and Flower Street, but the company’s lease is set to expire in December as Aetna needs the space for its own growth needs. In addition, The Hartford Financial Services Group Inc. is building a 450,000-square-foot campus in Windsor and will consolidate its Hartford Life operations in the building. Completion of The Hartford’s first phase is scheduled for mid 2008.
Until MetLife’s recent announcement that it was vacating 373,000 square feet of office space at CityPlace I in Downtown Hartford, large corporations had few options for large blocks of contiguous office space in Downtown Hartford. They were forced to look to areas outside the city for room to grow. Windsor offered ING and The Hartford an abundance of reasonably priced land that was located near the city and major highways.
Historically, the Hartford office market has performed very much like a game of musical chairs. While space users tend to stay in the area, they move from one building to another, sending vacancy rates up or down by only a few points. For example, PriceWaterhouseCoopers recently announced it will lease 46,000 square feet at CityPlace I, vacating its offices on 100 Pearl Street.
However, following more than 400,000 square feet in leases signed by The Travelers Companies for Downtown Hartford office space during the past year, most real estate professionals were fairly optimistic the central business district would finally experience true growth. In 2006, Travelers inked deals that included 210,000 square feet at State House Square and 92,000 square feet at One Financial Plaza. Earlier this year, the insurer leased an additional 23,000 square feet at One Financial Plaza.
MetLife dashed those hopes when it confirmed in April that it will purchase the 550,000-square-foot South Building and several nearby buildings in Bloomfield from CIGNA Corp. The insurer will consolidate several thousand employees from around the state at the location, including all of its workers at CityPlace I in Downtown Hartford. On the positive side, it appears that Travelers is out in the market again for even more office space. The company is seeking 75,000 square feet to 100,000 square feet with a good possibility for more by year-end 2007.
Average rental rates for Class A office space in Downtown Hartford ranged from a low of $19 per square foot to a high of $27 per square foot at mid-year 2007. Most of the office properties in the central business district saw asking rents around $22.50 per square foot, with only the top floors at CityPlace I achieving rents at the high end of the scale.
In the suburban markets, average rental ranges for Class A office space stayed relatively flat in the second quarter. The premier buildings in Rocky Hill posted rates as high as $23 to $24 per square foot at mid-year 2007, while the North market recorded rents of $16 per square foot.
In the first quarter, prior to MetLife’s announcement that it was vacating 370,000 square feet, the Class A vacancy rate was hovering around 15 percent. There was every indication that it would drop even further, fueling some optimism for further growth in the market. Once MetLife leaves the Downtown office market, vacancies there are expected to increase to the 17 percent to 18 percent range.
Although MetLife is vacating space in CityPlace I, the building is rarely vacant for long. The premier property, considered the only national address in Hartford, typically ranges from 90 percent to 95 percent leased even in the worst markets.
The suburban markets have remained fairly strong, with Class A vacancy rates in the South market, including Rocky Hill, around 11.5 percent at mid-year 2007. West market vacancy rates were approximately 11 percent, and the East market, including Glastonbury, were about 8.5 percent. Windsor, the site of nearly 1 million square feet of new user-driven office space, saw vacancy rates of about 23 percent.
The two markets of note in Connecticut are Windsor and Rocky Hill. Located south of Hartford, Rocky Hill boasts some of the newest and most technologically superior office buildings in the Hartford area. It is centrally located and remains one of the most accessible points in Hartford County. The Rocky Hill office market’s appeal to national creditworthy tenants has strengthened in the past few quarters.
— Christopher Ostop is a senior vice president in Jones Lang LaSalle’s Hartford, Connecticut, office.
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