At first look, Hartford’s office market appears to be in decent shape, with vacancies structurally lower than the national average:
But rent growth lags well behind the national average:
So what’s the deal?
The prevailing story in Hartford: continual lack of even moderate job growth. In fact, office space hasn’t been added recently, but removed. Inventory has shrunk by more than 2% since the end of 2010 due to demolitions.
Since 1991, job growth across the U.S. averaged 1.1% annually, but over that time, Hartford’s growth has been a mere .1%. Abysmal job growth wasn’t always the case in Hartford—from 1970 to 1985 it was 1.6% annually, still below the U.S. average of 2%, but not by a substantial margin.
As in a lot of Northeast metros, the recession of the early ’90s was particularly hard on Hartford, and the metro’s job base shrank by 11%:
To put that in perspective, that’s almost twice the size of the metro’s contraction during the most recent recession. More recently, the gap in job growth has narrowed a bit, and over the past five years growth has been .9% for Hartford, compared to the 1.8% U.S. average. This does not indicate a turnaround in Hartford’s economy, but rather a byproduct of up-cycle growth. When the national economy expands, the gap between Hartford and U.S. average job growth shrinks, but when the national economy contracts, losses often hit harder in Hartford and linger longer. Over the next five years, job growth across the U.S. is expected to decelerate to about 1.3% annually, and job growth in Hartford will also follow this trend, slowing to .3%.
Hartford may still be known as the insurance capital of the U.S., but that’s not really true anymore. The decline of insurance jobs in Hartford has been slow and painful:
In fact, the Minneapolis metro area, with roughly 60,000 insurance jobs, has 50% more jobs in the industry than Hartford, thanks in part to Travelers’ relocation of its headquarters from Hartford to St. Paul in 2004.
That relocation epitomizes a long trend of mergers and acquisitions in the insurance industry with varying but mostly detrimental effects on Hartford’s economy. In 1983, Connecticut General Life Insurance Company merged with the INA Corporation to become Cigna, and the home office became Philadelphia. In 1996, the Connecticut Mutual Life Insurance company merged with MassMutual and moved its headquarters to Springfield, MA, a 25-minute drive to the north. Aetna spun off its financial services division to ING Groep, a Dutch company, in 2000. In 2015, Cigna was bought by Anthem, which is based in Indianapolis, though the deal is currently in limbo, as it was challenged by the Justice Department. In another deal last year, Cigna announced a merger with Humana, based in Kentucky—also currently tied up by the Justice Department.
In both deals, company officials reported that they plan to keep a weighty presence in Hartford. But in the case of the Cigna-Anthem deal, its headquarters will remain in Indianapolis, meaning a cut in executive payroll and a decline in the amount of money flowing into Hartford. Regardless of the headquarters location, the removal of duplicate functions (HR, accounting, etc.) will likely cause some cuts. Further clouding the story is Massachusetts's recent attempt to poach employers from Connecticut. GE was the first, and rumors suggest the Commonwealth is trying to lure Aetna as well. All these transactions get confusing quickly, but in sum, Hartford has its cart tied to an industry not doing too well:
What’s more, manufacturing is an industry long in decline in the U.S., and Hartford also has more exposure to that as well. Currently, about 10% of all jobs in Hartford are in manufacturing, and the sector is expected to shrink indefinitely as positions relocate or automation makes jobs obsolete.
In 1970, one out every four jobs in the U.S. was in manufacturing, but now that number stands at one out of every 12 jobs (8% of total employment). Similar to many areas of New England, Hartford has a long tradition of manufacturing, starting when many of its mills were along the Connecticut River. In fact the area was the heart of gun alley, which stretched from Springfield (Smith & Wesson) in the North, to Hartford (Colt), down to New Haven (Winchester), and Bridgeport (Remington) in the south. Hartford became known as a good place for precision engineering, with companies like Colt and Pratt & Whitney, which brought more jobs to the state. According to Hartford Business Journal, Pratt & Whitney’s supply chain includes over 600 companies in the state of Connecticut. But the cost of doing business is far cheaper in other parts of the country, or offshore, and manufacturers located in the Northeast are continually shipping jobs elsewhere.
Not surprisingly, Hartford has a higher than average unemployment rate, particularly Downtown, which has led to a crime problem. In fact, according to Law Street Media, Hartford was ranked as the fourth most dangerous city in the U.S., one spot behind New Haven and six spots ahead of Springfield. The lack of jobs and the high urban crime rate have led to abysmal population growth.
Without jobs, many people aren’t staying, and it’s difficult to attract new residents with such a bad economy. Since 1991, when things really turned south in Hartford, annual population growth has been .3% annually, compared to 1% nationally. The forecast for population growth over the next five years is similar.
So what are the bright spots? There are a few; the city has recently shown some initiative in development projects aimed at drawing and keeping a younger cohort, such as building a new minor league baseball stadium to house the newly dubbed Hartford Yard Goats. Along with the new stadium, the redevelopment of the old Bank of America tower into luxury apartments now provides downtown residents with modern living space as Hartford tries to move toward a live/work/play environment. A key piece to that puzzle is UConn, which is underway on its new downtown campus, scheduled to open for the 2017 academic year. If all goes as planned, 2,300 students, in addition to 250 faculty, will call the campus home. Having a major college or university presence tends to bode well for supporting business and economic activity, which Hartford certainly could use.