On the Horizon
Construction projects in the past few years have lowered occupancy levels, but absorption will stabilize, since few new units are expected to come online this year. Last year, the Hawthorne at Gillette Ridge project in Bloomfield added 246 one- and two-bedroom apartments, ranging in size from 677 square feet to 1,500 square feet, with rents ranging from $1,010 per month up to $2,288 per month. Another 2005 project was Mansions at Hockanum in Vernon, which contributed 424 one- and two-bedroom units ranging from 740 square feet to 1,013 square feet. Rents there range from $995 per month up to $1,495 per month.
Several projects are slated for completion this year. They include the 120-unit Sage Allen, which will feature studio units with prices ranging from $750 per month to $2,500 per month. Hartford 21 is a mix of housing, retail, and office space in a 36-story high-rise tower that includes 262 luxury apartments along with 93,000 square feet of office and an 800-car garage. The 1429 Park Street project is scheduled for completion in 2006 as well, with 56 one-bedroom lofts. Despite new multifamily inventory, Hartford’s vacancy rate of 5 percent to 5.2 percent is still below the national range of 6.1 percent to 6.6 percent. By the beginning of 2007, Hartford is projected to return to 96 percent stabilized occupancy.
Though some new properties (both rental and for-sale units) are coming online through 2006 and 2007, Hartford’s supply-constrained market will limit new condominium and multifamily construction projects other than adaptive reuse of functionally obsolete properties. The majority of multifamily transactions in Hartford tend to be older, vintage brick buildings of 20 to 60 units, some from as early as the turn of the 20th century. Most of these well-located, B-quality properties were built between 1950 and 1970, with average per-unit values still under $50,000. There is a fair amount of transaction velocity in the local market. Year-to-date in Hartford County as of June, 1,333 units have traded for $90 million with average per-unit values just over $67,500. Sales volume is on par with 2005, in which a total of 2,178 units traded for $132.3 million (just under $61,000 per unit). Most of the inner- city projects tend to focus on the adaptive reuse of older mill buildings, office/retail buildings, and some mixed-use properties.
One combination of new construction and historic renovation in downtown Hartford is the Trumbull Centre, completed in January 2005 (also known as Trumbull on the Park). Located across from Bushnell Park, the $38.5 million mixed-use development features a nine-story apartment structure with 88 park-view units, an 11-floor, 600-space parking structure, and 12 additional luxury apartments in two adjoining historic buildings. Service, retail stores, and restaurants fill the ground floor of the development. Part of the project included the restoration of the two so-called Lewis Street buildings, which had deteriorated after years of neglect. The strategically located Trumbull Centre property is an example of the type of lifestyle the rising echo-boomer population prefers, and the ancillary impact on other properties in Hartford’s downtown district is financially positive, as many of the surrounding properties are also improving facades, renovating interiors, and adding new, upscale retail tenants and restaurants.
Transaction velocity on buildings in the Class A segment of the multifamily market is low. In 2005, only 414 luxury units traded, and year-to-date there has only been one sale of 294 units. Construction costs have risen faster than inflation, and hurricanes have damaged critical ports elsewhere in the country, placing additional reconstruction demands on material and labor supply. With construction costs rising and a reasonable ceiling on rents, developers can only afford to build Class A luxury units. Very few of these Class A properties are trading hands, as they are typically undertaken by build-and-hold developers.
With apartment sales well below replacement cost, a supply-constrained market, and a renewed urbanism, Hartford offers opportunities that weren’t available there not that long ago.