Being one of the wealthiest states in the USA, Connecticut offers a supportive home base to businesses of all sizes, from Fortune 500 companies with global reach to micro-enterprises serving local communities.
In terms of its business environment, CT gets good ratings in workforce, education, and business friendliness.
Recently, some locations within Connecticut have been getting attention from entrepreneurs and becoming hotspots for innovation and startup activity, as is the case of New Haven, one of the 12 best US cities for tech startups. Other locations already have a strong reputation for the quality of their innovation-related facilities, like Stamford or Bridgeport.
On the whole, Connecticut already has a considerable amount of registered businesses, exceeding 350,000. And new business registrations have been on the rise during the past couple of years, which is taken as a sign of confidence in the possibilities offered by this state. The majority of new ventures are in sectors like construction, real estate, professional and business services.
As a state, Connecticut is renowned for its strengths in aerospace, biotechnology, film and media, advanced manufacturing, green energy, insurance, and financial services.
In addition, there are 72 designated Opportunity Zones across the state, whose resident businesses cover a wide range of economic activities, from tourism to infrastructure, and including digital media, healthcare, and retail.
The largest companies in the state include Xerox, Cigna, Otis Worldwide, XPO Logistics, Black & Decker, and Charter Communications. Also worth mentioning is the amount of fast-growing startups in Connecticut involved in cryptocurrency, artificial intelligence, and life sciences.
Office Market in Connecticut
Office Space in Hartford
The office market in the state's capital city consists of approximately 25 million square feet, which are rather evenly distributed between Class A and Class B assets. The biggest concentration of offices is located in Hartford CBD and in the western suburbs.
Availability of Class A space in the city center has been strained since mid 2010s, but this changed after 2020. Right-sizing trends and relocations have led to several consecutive quarters of negative absorption, and pushed vacancy rates above 22%. Double-digit vacancies exist in all sub-markets (urban and suburban), with the exception of non-CBD Hartford properties.
Asking rates average $20 / psf, rising to the mid $20s for Class A offices.
Office Space in New Haven
Recent trends affecting office real estate in New Haven include:
- The growth of the life sciences sector, which does not have ready-made suitable space to accommodate requirements. This has led to the conversion of many office units into lab space, reducing availability and choices for tenants in office-using sectors.
- As an effect of a generalized increase in remote work, many companies are actively seeking space in the suburbs, since they no longer need to pay premium downtown rates and can instead be closer to where their employees live. With the exception of sub 5,000 square feet units, the general trend points towards a substantial footprint reduction.
In late 2022, vacancy rates were around 20% and average asking rents stood at $22 / psf for both asset classes.
Office Space in Stamford and Fairfield County
This is the most active Connecticut office market, with most leasing activity concentrated in Stamford and Greenwich, although in general, office users still need to come to grips with new working patterns and their overall impact on existing office assets.
More than 80% of recent transactions have involved Class A offices in central locations, where asking rents are increasing as availabilities shrink. Vacancy rates in Stamford average 31%, 12% in Greenwich, and are in the mid 20% in the rest of Fairfield County.
Across the entire metro area, Class A offices command average asking rates $41 / psf, vastly exceeding that average in Stamford and Greenwich CBDs.
Retail and Industrial Market in Connecticut
The total retail inventory in Hartford amounts to approximately 80 million square feet. Although key indicators have recently been below the national average, local job creation is stronger than the US average and is therefore expected to improve the overall market performance. Average vacancy rates are in the region of 4.5% and asking rents are on an upward trend, averaging $16 / psf.
Industrial assets in central Connecticut amount to 140 million square feet of space, with Hartford doubling the size of Stamford in terms of inventory. The manufacturing sector in both areas has experienced recent growth, boosting demand and creating the conditions for a healthy pipeline of new deliveries. In late 2022, demand for industrial space in Connecticut was at an all-time high, bringing vacancy rates below the 5% mark.
Asking rents for industrial assets are just below $6 / psf, with the priciest real estate being in Eastern New Haven and Southern Hartford. Looking ahead, life sciences and logistics companies are likely to drive further growth in this market.
Tax Breaks, Business Incentives and Support
For a few years, state authorities have made a series of changes to Connecticut's corporate tax systems to encourage business creation and attract investment. Some noteworthy initiatives include:
- The JobsCT tax rebate program, focusing on offering support for job creation purposes.
- Property tax abatements for eligible companies in enterprise Zones, in Corridor Zones along Route 8 and I-395, or near one of the following Connecticut airports: Bradly, Groton, and Waterbury.
- Corporate business tax exemptions for Stamford businesses in banking, financial, and insurance services.
- Industry-specific tax relief for film, media, manufacturing, and biotech companies.
- Connecticut Small Business Boost Fund, which provides loans of up to $500,000 to entrepreneurs who are facing barriers to access capital.
CT-based small businesses can also access regional loan programs. A full list is available here.
For a full breakdown of available incentives, visit the Connecticut Department of Economic and Community Development website.