Striking gold in CT office market beset by foreclosure, vacancies

A broad cross-section of downtown’s major office towers are still under the weight of foreclosure, as the fallout of a pullback in leasing from the pandemic still hangs in the market and tenants remain wary of inking space deals with landlords in financial trouble.

But there is at least one bright spot in downtown Hartford: One Financial Plaza, the “Gold Building.”

The iconic, 26-story tower —  its opaque, gold-tinted windows giving rise to its nickname — is successfully fighting its way back from a devastating setback in 2021 when insurance giant Travelers Cos. notified the Gold Building’s owners it would not be renewing its lease for a third of the building.

The recent announcement that high-profile law firm Shipman & Goodwin will relocate to the Gold Building — owned by partners Hartford-based LAZ Investments and Shelbourne Global Solutions LLC of Brooklyn, N.Y. since 2019 — and will lease 70,000 square feet spread across three floors by the end of 2027 marked another significant gain.

“It was pretty frightening what happened with Travelers,” Jane Davey, director of asset management and acquisitions at LAZ Investments said. “But we’ve now managed to see the light of day.”

Shipman & Goodwin will relocate from one of two office towers on nearby Constitution Plaza, where six buildings are part of a foreclosure and could be sold later this year.

In August, accounting firm CohnReznick is expected to begin moving into a full floor that it has leased in the Gold Building, relocating from Metro Center on Church Street.

“And we’ve got another prospective client that we’re going after that would really bring us back to where we were before,” Davey said.

Davey said with the additional tenant, who she did not name, could push occupancy, including pending lease deals, to about 90% by the end of this year.

The occupancy is enviable, compared with other office towers that have seen their tenant roster shrink in the aftermath of a pandemic that dramatically reshaped the workplace nationally. Office workers are spending more time working at their homes and less time in the office, leaving employers with space needs that are far less than before COVID-19.

The occupancy of the Gold Building’s 621,000 square feet compares with roughly 50% for the city’s tallest office tower, CityPlace I on Asylum Street. The 38-story CityPlace I encompasses about 885,000 square feet, fell into foreclosure and is now in the hands of a receiver that is seeking a sale, according to court documents.

A receiver is responsible for managing a property, collecting rent and maintaining it — typically acting as a custodian of property for a lender until it is sold in a foreclosure.

Davey said she believes the stability of the ownership of the Gold Building, combined with its local owner partner, LAZ Investments — an arm of parking giant LAZ Parking — which is also headquartered in the building makes a difference.

“We’re obviously very committed to Hartford,” Davey said. “That’s been a big selling point.”

LAZ Investments is a major investor in a broad range of downtown real estate, including both office and structures that have been converted to apartments. Shelbourne Global is downtown’s largest commercial landlord, with two of its office towers — 20 Church Street — the “Stilts Building,” and Metro Center — in foreclosure.

Shelbourne is partnering with LAZ Investments in an attempt to bring 20 Church Street out of foreclosure in a new ownership arrangement. Davey declined to comment.

Andrew Filler, a principal in the commercial real estate firm Avison Young in Hartford, said the ownership of an office building has emerged as key in a prospective tenant’s mind.

“The first question that people ask is “What’s going on with ownership of the building?’ ” said Filler, who represents the Gold Building. “That used to not be a question that people asked. Now, it’s one of the first thing people ask.”

Travelers’ decision five years ago not to renew leased space at the Gold Building came as part of a move to consolidate its workforce in its headquarters complex in the heart of the city following a major renovation.

The decision opened up a daunting eight floors in the Gold Building, plus another two when global asset management company Barings soon after declined to renew its leases. On top of that,  blue-chip tenants, financial services company TIAA, technology giant IBM and professional services company Accenture ended their leases. In addition, General Re, the reinsurer, and professional services giant KPMG downsized their leases.

Since then, the Gold Building has been successful in attracting relocations from the suburbs. They include financial services company Sun Life Financial moving into downtown Hartford from Windsor in 2022 and more recently, civil engineer Fuss & O’Neill, relocating from Manchester.

Gordon Rees Scully Mansukhani, LLP, the law firm with offices in all 50 states, is expanding its presence at the Gold Building in a lease first signed in 2024, to now encompass a full floor. The law firm moved from Glastonbury.

LAZ Investments’ Davey said expansions such as the one by Gordon Rees demonstrate that companies want to see their employees in the office a larger part of the work week.

“We are seeing a retrenching, that companies realize they need an in-person presence, especially if they have junior employees that are looking to learn and grow within their ranks,” Davey said. “So, there has been a bit more reprioritizing of in-person work, albeit not five days a week, but, at least, the majority of the week.”

Davey said the Gold Building also has its eye on emerging tenant expectations for amenities.

For instance, LAZ Investments and Shelbourne are investing in a major renovation in the Gold Building transforming the former Travelers training center into new conference space that can be divided into smaller rooms.

“The point being is that other buildings are now offering that as an amenity,” Davey said. “So, rather than a tenant having to build a large conference area into their space. we’re now offering that as a building amenity.”

The Shipman & Goodwin lease still recognizes the reality of the office market. The law firm is leasing a third less space at the Gold Building than it now occupies at One Constitution Plaza.

And the Travelers downsizing still casts a long shadow, even five years later, with three floors of the property casualty insurer’s space still unoccupied at the Gold Building.

Kenneth R. Gosselin can be reached at kgosselin@courant.com.