Developers, city say 1,000 smaller units could attract more young professionals
By Greg Bordonar
February 28, 2011
A New York developer is betting $500,000 that there is enough demand in downtown Hartford to build 180 new high-end apartments in the long-time vacant Clarion Hotel.
But is there a really a market for more downtown apartments at time when office vacancy rates are hovering near record highs and empty retail storefronts dot nearly every city block?
City officials and some developers say yes, citing a long-term need for as many as 1,000 more units downtown, particularly studios or one-bedroom apartments.
Others remain skeptical, arguing that job growth in the city’s central business district needs to return before any further expansion is brought into the discussion.
“Where are the jobs being created that are going to support more units for downtown Hartford,” asked Brian Lemire, a senior property manager for Winn Residential in Hartford and president-elect of the Connecticut Apartment Association. “If you don’t have the jobs downtown, who are the people that are going to live downtown?”
David Panagore, the city’s chief operating officer, remains bullish on the market, however, saying long-term he sees a need for 1,000 new units in the core of downtown and possibly as many as 2,500 more units including the periphery.
Panagore said the city has worked hard over the past decade to build its downtown housing stock and add other amenities to attract people to live in or near the central business district. The most recent addition is the upscale grocery store The Market, which is scheduled to open in the Hartford 21 retail and residential complex in March.
City officials have said for years that a downtown grocery store will serve as a major selling point, and they were even willing to chip in $300,000 to make it happen.
Panagore said eventually adding more residential units would help downtown generate its own self-supporting activity to spur retail as well. He also noted that there are still about 100,000 people working downtown.
“The main function of a city is bringing people together. It’s the region’s living room,” Panagore said. “As we continue to add amenities, that will create critical mass.”
If there are any indicators that point to greater residential demand, it may be the success of newly renovated or built apartment properties that have come online over the past decade, developers and landlords say.
That includes properties like The Lofts at Main & Temple, Trumbull on the Park, 915 Main St., Hartford 21, 266 Pearl St., and others, which have remained stable throughout the downturn and are occupied at 90 percent or better, said Michael Stone, first vice president of multi-housing services for CB Richard Ellis in Hartford.
There is also evidence that people — mostly young professionals — are willing to pay a premium to be downtown. Stone said downtown rents currently go for about $2 per square foot, higher than the $1.40 per square foot price tag for apartments in the suburbs.
“That is an indication that some people are willing to pay a premium for downtown living,” Stone said. “I do believe there is room for more capacity.”
Among the apartment complexes that have been in demand is The Lofts at Main and Temple, whose 78 high-end studios and one and two bedroom apartments have consistently been 95 percent to 98 percent occupied.
Trumbull on the Park, the $38.5 million residential and retail complex that opened on Trumbull Street in 2005, has an occupancy rate of about 98 percent.
Other newer complexes like Hartford 21, 915 Main St., and 55 on the Park, are seeing similar occupancies, brokers and landlords said.
Downtown Hartford developer Martin Kenny, the developer of Trumbull on the Park, said he too sees demand for more one-bedroom apartments and studios, possibly as many as 750 units.
Kenny said there is a market that the existing downtown product isn’t addressing: smaller studios up to 525 square feet with rents of $1,000 or less. It’s the type of housing that can be more affordable to residents while still being profitable, since landlords would still be making $2 a square foot, Kenny said. “That is where you need to be for the project to be economically feasible,” he said.
Kenny said people living downtown are mostly young professionals — including accountants, lawyers, and insurance executives — working at top companies . But downtown is not seeing as many people just out of college taking entry level positions.
“Those are the people who want to live downtown but there is not enough product to satisfy that demand,” Kenny said, adding that it is difficult for people earning $35,000 to $50,000 a year to afford central business district housing.
Additionally, empty nesters, who were originally a highly sought after demographic, haven’t appeared in droves either.
Many of the newer properties are flashier, higher-end apartments like Hartford 21 and The Lofts at Main & Temple, which cost about $1,500 to $2,000, or more, a month.
In the case of the long-vacant Clarion Hotel, New York developer Wonder Works Construction and Development recently paid $500,000 for the property with plans to turn it into about 180 apartments.
Sources say Wonder Works is interested in more high-end units.
Older, class B apartments in the city, many of which trace their roots back to the 1950s, ‘60s or ‘70s, are about 80 to 85 percent occupied and lower in price, industry observers said.
And apartments in the suburbs, observers say, also have consistently strong demand, especially newer properties, with the average occupancy of 95 percent or greater.
Stone, of CB Richard Ellis, said he has seen interest among private equity developers who have targeted Greater Hartford as a market they want to invest in because of its stability. He said new supply grows in this region at a very slow pace, which makes it attractive.
“Private equity developers have targeted this market because they know if they build 150 units today, someone won’t come along and build 1,000 units tomorrow,” Stone said. “There is stability.”
Although growth of apartment properties in the suburbs tends to occur at a snail’s pace — projects can take four to five years just to get off the ground — there could be more development in the coming years as traditionally skittish municipalities look for ways to expand their tax base, Stone added.
But of course, any demand for new housing will depend, in part, on bringing more jobs to the city, which has been a challenge.
“Thirty percent office vacancy rates effect demand negatively,” said Marc Levine, one of the developers of the Temple Street project. “The ability to walk to work is a major plus. If there isn’t any work, it doesn’t help.”