New Office Space Deal Boost For Downtown

August 25, 2006
By KENNETH R. GOSSELIN, Courant Staff Writer

The St. Paul Travelers Cos. will lease more than 300,000 square feet of new office space in downtown Hartford as part of its plans to expand in the city - providing a significant boost to the downtown office market.

Thursday, the owners of State House Square announced that the insurer will lease an additional 210,000 square feet of space at the office and retail complex opposite the Old State House. St. Paul Travelers also will renew its lease for 181,000 square feet it already has there.

In addition, the insurer is expected to take at least another 90,000 square feet at One Financial Plaza, the "Gold Building," on Main Street. An announcement of that lease is expected soon.

The leases are part of previously announced plans by the insurer and state officials for an estimated $66.6 million renovation and expansion project by St. Paul Travelers that will bring about 500 jobs to Hartford and more than 100 others to Windsor.

The lease for additional space at State House Square, owned by Harbor Group International, is one of the largest deals in the central business district this decade. Together with what Travelers is expected to lease at the Gold Building, the activity could push the vacancy rate for prime, "Class A" space to 13.2 percent, down from 18.6 percent, according to the Hartford office of CB Richard Ellis, the commercial real estate services firm.

That could be low enough to give landlords more leverage in negotiations and nudge up rental rates in the central business district, which have been flat in recent years. Such signs would signal an office market gaining additional strength.

If there is no significant loss of tenants downtown, average asking rents could increase by 5 percent to 10 percent, or a dollar per square foot, in the next year, said Patrick Mulready, a broker at CB Richard Ellis in Hartford.

At the end of the second quarter, the average asking rent for Class A space - offices with the most modern amenities and floor plans - was $22.75 a square foot, according to CB Richard Ellis.

It isn't likely there would be enough leasing momentum in the market to encourage new construction, said Jonathan K. Putnam, a broker in the Hartford office of Cushman & Wakefield of Connecticut.

"In the short-run, this is very good news for downtown Hartford," Putnam said. "It takes two buildings that had large blocks of space and takes them off the market, except for some small pockets of space."

With the lease at State House Square, which includes space formerly occupied by Advest Inc., the complex will be 96 percent occupied.

Jones Lang LaSalle, the leasing agent in the State House Square deal, couldn't be reached for comment.