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February 5, 2024 Deal Watch

CBRE: Greater Hartford office tenants added 81,944 sq. ft. of net space in 4Q

PHOTO | COSTAR The 80,524-square-foot office building at 5 Waterside Crossing in Windsor recorded two new lease deals in the fourth quarter of 2023. Great American Insurance Group renewed and expanded its lease to 33,025 square feet, while fellow insurer Swiss Re renewed a 12,051-square-foot lease, according to CBRE.
By Michael Puffer
Greater Hartford office market snapshot (4Q 2023)
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Although battered by the post-pandemic shift to remote work, Hartford County’s office market managed to chalk up a second consecutive quarter of occupancy gains to round out 2023, according to the latest CBRE market report.

Tenants added 180,326 square feet of office space in the fourth quarter of 2023, according to CBRE. Including space that was vacated, the region netted 81,944 square feet of positive absorption in the quarter.

However, that doesn’t mean the post-pandemic pressures on the office market are in the rearview mirror, said CBRE Senior Vice President Michael Puzzo.

Greater Hartford office tenants still shed a net 73,000 square feet of space for all of 2023, Puzzo noted.

There would need to be at least two additional quarters of positive space absorption before any conclusions can be drawn about shifts in the office leasing market.

Since the pandemic hit in 2020, many office tenants have sought out smaller spaces and short-term leases as they embrace hybrid work models and try to reduce real estate costs.

While office rents have stabilized (to $20.46 per square foot in the fourth quarter), higher vacancy rates have left tenants with the upper hand, Puzzo said. Landlords are offering longer rent-free grace periods and more money for tenant fit-outs, he said.

Hartford County still had a relatively high availability rate of 27.6% at the close of the fourth quarter. That is down 30 basis points from the prior quarter, but up 30 basis points from the close of 2022.

One of the largest deals during the fourth quarter was Great American Insurance Group’s lease renewal and expansion, at 5 Waterside Crossing in Windsor, to 33,025 square feet. Fellow insurer Swiss Re renewed a 12,051-square-foot lease in the same property, according to CBRE.

Class A attraction

Office leasing in the fourth quarter focused on newer, amenitized Class A buildings, which captured 83% of activity, CBRE reported. This falls in line with another post-pandemic trend.

Even as they shrink their office footprints, many companies have sought out higher-end space at newer or renovated buildings with amenities that can attract workers back to the office.

Hartford’s central business district led all submarkets, with 80,000 square feet of leasing activity in the fourth quarter, according to CBRE. That’s up 40% from the prior quarter.

Part of that increase was driven by law firm McCalla Raymer Leibert Pierce relocating within Hartford from Weston Street to 280 Trumbull St., in downtown.

Downtown Hartford’s office vacancy rate was above 27% at the end of the fourth quarter, according to CBRE.

Hartford’s suburbs saw 94,000 square feet of leasing. The “Hartford West” market, which includes West Hartford, Avon and Farmington, led among the suburbs, with 16 new leases occupying 36,000 square feet, according to CBRE. The average deal size was 2,200 square feet.

Greater Hartford office market snapshot (4Q 2023)

Buildings: 400

Inventory: 25.98M sq. ft.

Vacancy rate: 27.4%

Availability rate: 27.6%

Avg. asking rent (per sq. ft.): $20.46

Source: CBRE

 

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