Main Presentation
Perspectives on Hartford's Rebirth
John McCormick
CBRE New England
Phil Worley introduced his son-in-law, CBRE's Hartford area commercial real estate expert John McCormick. Mr. McCormick has been with CBRE New England since 1989 and currently serves as their Executive Vice President and since 2015, as a member of their Senior Partner Advisory Committee. For many years Mr. McCormick has been CBRE's top producer and has been repeatedly recognized for his accomplishments.
Mr. McCormick opened with thanks to Ike Eichehorst for the invitation to speak. He last spoke to Rotary Club of Avon-Canton in 2006 or 2007, just before the recession and noted just how much has changed since then. He asked for a show of hands among the Rotarians present to indicate how many had attended an event or had business in Hartford in recent months. Over 65% of those present acknowledged affirmatively. Mr. McCormick recited an oft heard tag line about Hartford, "We're an evolving 18 hour city", meaning we struggle to compete with Boston and New York City for people, business and attractions. Hartford currently has just 115,000 residents.
Much has changed in recent years, however, including: our new Convention Center, the 400 room Marriott Hotel, CT Science Center, Hartford 21's 275 apartments and associated retail & amenities businesses. Hartford boasts a 6 million square foot office market within an 8 x 5 square block central business district. There is a 20% vacancy rate which equals 1 million square feet of available office space. The new Yard Goats stadium and the redeveloping Downtown North ("DoNo") district includes 16 sites totaling 12 acres yet to come on line. Also, the south side of Hartford, south of Bushnell Park, has a major plan in place for conversion to a pedestrian friendly destination location.
Hartford rental rates are $20 to 25 per square foot for a fully grossed lease. At that rate, landlords net just $10 to 15 per square foot after taxes and operating expenses. For example, the Gold Building, includes 120,000 square feet. At 20 to 25$ per square foot, less 12 to 13$ taxes and operating expenses per square foot, leaves just 10$ net, which is inadequate to support new construction. New construction would cost $400 - $500.00 per square foot and that requires a net of $40 to $50.00 per square foot to support it.
There are four "themes" commonly discussed with respect to Hartford's redevelopment. These are: 1. Urban Migration, 2. Renewed Commitments, 3. Multifamily Conversions & New Construction and 4. Hotel Development & Revitalization.
1. Urban Migration: This trend is now in its eighth year and is easily seen among the young, including our Connecticut young. In order to keep and attract them Hartford must meet their expectations. In Hartford just 4 firms have 220,000 square feet of business activity. There are 28 restaurants within walking distance of the business district and there are trains, buses, Uber and Zipcar available. What can be done, is being done.
2. Renewed Commitments: Of the available space, 4 million square feet is committed to and occupied by Bank of America, PWC, Conning and Barings.
3. Multifamily Conversion & New Construction: Many of the 3000 existing apartments are "micro apartments" such as studios.
4. Hotel Development & Revitalization: The Candlewood Suites and Goodwin Hotel are examples of this trend.
Vacancy rates for Class A office space are 20% and for Class B office space 32%. There is a push to convert Class B to multifamily residences. Examples include "Teacher's Corner" near Union street and 101-111 Pearl between Asylum, pearl and Trumbull Streets. That building has been vacant for 16 years, since Bank of America and Fleet Bank merged.
Front street is 49% occupied, despite being considered in the "9th Inning." The Radisson Hotel has created 200 apartments on the top 8 floors of the hotel, intended for players and staff of the Hartford Yard Goats as well as others.
Other factors affecting Hartford include its new UCONN downtown campus which includes 165,000 square feet of space and draws 2200 undergraduates and 165 staff and faculty to town daily. Certain UCONN Storrs programs, particularly among the social sciences, are seeking to relocate to the Hartford campus.
A new Barnes & Noble book store, closely associated with UCONN's campus has also opened and is the first major national retailer to do so in a log time. A Starbucks shares its space.
Many restaurants and entertainment businesses have also invested in Hartford's future. There is a sense that, akin to the change to West Hartford center in recent years, Hartford is on its way to creating its own "destination sense." The Max Restaurant Group has invested $1.5 million in re-purposing its downtown restaurant as an example.
Hartford's infrastructure continues to evolve, and Mr. McCormick offered a nod to Representative Tim LeGeyt for his support of this type of investment. Projects such as CT Fastrack and its $465 million dollar Park Street stop may mitigate the adverse business consequences of the eventual I84 viaduct project in the future.
Amtrak, MTA and Bradley Airport's new $165 million dollar terminal are all positive developments for the greater Hartford area. CT Transit bus re-routings to include newer business development such as Buckland Square Mall has seen a 28% increase in ridership.
The Union Street redevelopment will see Union Station recreated about 1/2 mile west of its current location, and may include a "Faneuil Hall type" feel. The existiing building will be re-purposed.
The Hartford Yard Goats will open their second season on April 5, 2018. With 6500 seats available, the teams management has overcome the negative headlines which surrounded its creation. "Hartford Stole Baseball from New Britain", "Who Will Come to Hartford to Watch Baseball?" and "Why Would Hartford Get Involved in a Costly Stadium Project" were the headlines at the Yard Goats' birth. Meanwhile, in their first year, there were 45 sellout games for an under .500 team and 3500 16 oz beers sold per game. Of the Yard Goats 250 people, 90% are Hartford residents. The lesson is, Hartford area people like to have fun, and are willing to come to Hartford to do so. Mr. McCormick then asked for questions.
Paul Mikkelson asked Mr. McCormick how Hartford compares to our neighbors, New Haven and Springfield. Mr. McCormick noted that what's different about Hartford's efforts now is that state and local government are working together. He added that Aetna stayed. Among greater Hartford millenials, 62% graduated from public and private colleges in the state. If we can figure out how to keep that talent, all will fall into place for Hartford. New Haven's office rental rates are higher, though our apartment rental rates are higher. The millenials will go where the jobs are. The Hartford, Travelers and Aetna have made a 5 year, $50 million dollar commitment to support Hatford infrastructure including streetscape, security and safety within the city. That's a very positive development.
The Excel Center, owned by the state, is being marketed to a public-private partnership so the state can exit the management of that type of endeavor. A $40 to $50 million dollar commitment to repair the center has been made by the state to foster that eventuality.
Another Rotarian suggested Chuck Joseph open a third grocery store downtown. Perhaps it could be a new Rotary project? Time will tell! ;-)