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September 14, 2023

New study: Hartford beats competitor cities for affordable office space

Michael Puffer | Hartford Business Journal Patrick Duffany, managing partner with CohnReznick, MetroHartford Alliance President David Griggs and Hartford Mayor Luke Bronin at a Wednesday release of a new study comparing the cost of doing business in Hartford to 14 competing metro areas.
By Michael Puffer

As Hartford continues to try to fill vacant office space coming out of the pandemic, officials are touting a new study that shows the city as a good deal when it comes to the cost of business. 

The MetroHartford Alliance, on Wednesday, released a new study comparing taxes and lease costs in Hartford to 15 other top markets for insurance and financial services – traditional top industries for the city.

When comparing the cost of a 50-person insurance firm using 20,000 square feet of space in cities like New York, Boston, Charlotte, Columbus, Chicago and others, Hartford came out second among 15 in terms of affordability, according to the study.

Only Des Moines, Iowa, fared better.

“I think Connecticut is a great place to live, but what the study shows is it’s also a great place – very competitive from a talent and cost perspective – a great place for business to grow and expand,” said Patrick Duffany, a managing partner with accounting and consulting firm CohnReznick.  

The MetroHartford Alliance hired CohnReznick to perform the financial cost analysis used in the report.

Like other cities, Hartford has been hit hard by a post-COVID retreat from office space. With many workers now working fully or partially remote, companies have dramatically reduced their office footprints.

There is a concern among Hartford officials and others that vacancies will continue to rise as more leases come up for renewal.

According to broker CBRE, the vacancy rate of nearly 8 million square feet of office space available in 39 buildings in Hartford’s central business district rose from 17.9% in the second quarter of 2022, to 27.2% in the second quarter of 2023.

Brokers interviewed outside Wednesday's press conference say companies coming contemplating Hartford from outside the region are typically drawn for business reasons other than affordability, although it never hurts to be a relative bargain.

"I think if we were at the opposite end of the list, that would be a detriment to the Hartford market," said John McCormick, executive vice president with CBRE. "In this instance, it is a positive. But I don't know if that's driving decision-makers' decisions to come here." 

Hartford's reputation globally makes it an attractive zip code for companies working in the insurance and financial services field, McCormick said. Its relative affordability and the amenities available in Class A downtown buildings are also attractive to companies already in the region, he said. Companies from further afield are generally drawn for a specific business acquisition or transaction, he said.

"There's an acquisition," McCormick said. "There's a disposition. There's a group of lawyers or a medical practice that some national company wants to acquire. That's why they look at this market." 

Chris Ostop, managing director of broker JLL Connecticut, said Hartford has long been among the more affordable office markets. He also said cost is a secondary consideration for companies that might come to Hartford from outside the region. The ability to recruit ready talent is more important, Ostop said. 

Increasing office vacancy is a major concern for Hartford, which derives much of its tax base from its large commercial office sector. 

Corporate workers have also long been an essential client base for Hartford restaurants and retail, particularly in the downtown. The retreat of office users has fueled a renewed urgency for the city to continue building multifamily housing in its downtown, creating a new source of customers for retailers and restaurants.

Mayor Luke Bronin has, in the past, acknowledged the significant challenges the office market decline presents to Hartford. He has also repeatedly voiced hope that companies rethinking their space needs might see Hartford as an appealing alternative, both in terms of costs of doing business and in housing affordability for their staff.

At Wednesday’s press conference, Bronin praised the study as a marketing tool. It comes, he said, at a particularly good time, as many companies are recalibrating space needs.

“This study is a really compelling and powerful demonstration that Connecticut is a good place to do business, that Connecticut is not just competitive, but winning the competition when it comes to all-in cost of doing business, including taxes and the cost of real estate and everything else,” Bronin said.

Bronin and other speakers said Connecticut has a competitive labor pool. Bronin called Hartford’s talent pool in the financial services and insurance sectors “one of the deepest anywhere.”

The study found that annual lease costs and taxes for a 50-employee insurance firm using 20,000 square feet of office space ranged from $863,000 in Des Moines, to $2.37 million in New York City. Hartford’s annual cost was $879,000.

“What the data shows is that we are the second-most competitive city of the 15 cities we looked at,” said MetroHartford Alliance President and CEO David Griggs. “We all know

Connecticut and Hartford are great places to live. We need to make sure that we are telling the right story about what it means to do business here.”

For non-insurance offices using 20,000 square feet, Hartford was the cheapest at a $1 million annual cost for taxes and a lease, versus $2.84 million in New York. 

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