JANUARY 29, 2007
By MATHEW L. BROWN, Hartford Business Journal Writer
It’s becoming more and more difficult for large tenants to find office space in downtown Hartford, and brokers say that’s a good sign.
According to a Cushman & Wakefield third quarter 2006 office market report, Hartford County’s Class A office market sported its highest absorption rate since 1998, and its lowest vacancy rate, 11.2 percent, in more than five years.
According to the same report, the city’s central business district saw increased demand for Class A office space, 257,989 square feet of positive year-to-date absorption, and a vacancy rate of 10.7 percent, down from 14.9 percent in the third quarter of 2005.
Cushman brokers say the market maintained those figures through the fourth quarter of 2006, and they’re optimistic about 2007.
That optimism was rewarded last week when Lincoln Financial renewed its Metro Center lease in Hartford for five years.
Property owners outside Hartford have been successful in tempting large tenants away from downtown Hartford, but those days may be coming to an end, said Cushman broker Jon Putnam.
“We’re starting to see some rent appreciation,” in the suburbs, Putnam said. “They’re starting to ask more, and are less likely to offer concessions. There are a few large tenants on the market, and in a softer market, there might be more options, and you might be tempted to move.”
But the rising cost of moving to the suburbs and the lack of new construction downtown has kept the office market tightening.
Tenants like Prudential Financial, which occupies 232,000 square feet at 280 Trumbull Street, and Lincoln Financial, which has 240,000 square feet 350 Church Street, are now more likely to stay downtown, Putnam said.
And they’d better. “Their decision to stay downtown or move to the suburbs will be key to the CBD’s office sector strength,” according to the Cushman report.
Prudential’s lease expires in 2007. The financial services company subleases just over 100,000 square feet in 280 Trumbull to Cigna, which is leaving the building this year and going back to its campus in Bloomfield.
“There were options for them,” Putnam said of Prudential, “but if they were to stay, it would not be surprising, and it would be good for downtown Hartford.”
Michael Grunberg, the owner of 280 Trumbull, said he was confident Prudential would renew its lease. He said Prudential’s lease carries an expansion clause by which the company would take additional space upon renewal of the lease.
Grunberg also said he was trying to convince Cigna to stay at 280 Trumbull.
Land Of Lincoln
Lincoln Financial’s lease was set to expire in 2008. The company is staying in Hartford, but, with only 190,000 sqare feet, in less than the 240,000 square feet it occupies now.
“Why would they move out of that building?” wondered Nicholas Morizio, Colliers Dow and Condon president. “With the cost of moving to another location, any savings in rent would be negated by the cost.”
Aetna is helping downtown Hartford avoid a major vacancy by taking up all the space being left by ING in its move to a new office in Windsor.
Aetna is leaving its roughly 800,000 square foot Middletown office vacant, however.
The office markets surrounding Hartford are strong, though, and eastern, western and southern Hartford County all claim single-digit Class A vacancy.
The eastern market posts single digit vacancy for all classes of office space, even as Class B and C vacancy for the county as a whole remains relatively unchanged at just under 18 percent.
“There’s not that much empty space available,” Morizio said. “The market is very stabilized.”
Putnam said tenants in Class B and Class C space generally like to move up to Class A or Class B when the opportunity arises.