Newmark Grubb Knight Frank (NGKF) has found that the Northern New Jersey office market’s stubbornly high availability rate is beginning to decrease, as obsolete buildings in secondary suburban locations are removed from inventory due to redevelopment. In a recently released white paper, NGKF Research Manager Mark Russo reported there is more than 3.9 million square feet of recent and planned office building demolition and adaptive reuse projects in the region, which is helping to lower the availability rate which has averaged over 20 percent over the past five years.
Russo presented this research as part of a panel on repurposing suburban office parks at the American Planning Association 2017 National Planning Conference on Sunday, May 7th, 2017 in New York City, alongside Ralph Zucker of Somerset Development, Ann Brady of Plansmart NJ, James Hughes of Rutgers University and Carlos Rodrigues, FAICP of Design Solutions for a Crowded Planet. Russo, Zucker and Rodrigues will also conduct a mobile workshop in conjunction with the presentation on the following Tuesday, May 9th, 2017 at Bell Works in Holmdel.
Due to a combination of shifting workplace needs and preferences, suburban office markets in the US have been significantly underperforming. Tenants in the market are seeking upgraded amenities and working environments that are not typically provided by older facilities, yet a total of 71 percent of the inventory in Northern New Jersey was constructed prior to 1990. Current demand drivers for office space include high ceilings, open floor plates, maximum window line exposure, ample parking and modern building amenities such as food service, fitness centers and conference areas. Therefore, tenants with strict requirements are leaving obsolete buildings behind for build-to-suit opportunities.
Similar signs are visible in other major suburban office markets nationally, with companies relocating to the mixed-use, 24/7 environments preferred by the millennial labor pool, steering away from the single-purpose, sterile workplaces of the second half of the 20th century. The abundance of obsolete suburban buildings is contributing to Northern New Jersey having one of the highest office availability rates in the US. It is also creating a growing interest in re-purposing these obsolete properties through extensive renovation or redevelopment into competitive office product or for other uses such as residential, retail or industrial.
Mountain Development’s 56 Livingston Avenue in Roseland is an example of a suburban property that has fought to stay competitive. Following a $50 million upgrade that included the addition of a full-service cafeteria, fitness center and conference area, the once-vacant property is now 82.3 percent leased by tenants such as Connell Foley, Lowenstein Sandler and Brown & Brown. Taking another approach, “Bell Works,” the rebranded and redeveloped 2 million-square-foot former Bell Labs building in Holmdel, will be seeing an added 75,000 square feet of retail space and a 250-key hotel to help to create a mixed-use urban environment in the suburbs. The property has seen 514,445 square feet of leasing activity since its renovation, including major leases with iCIMs, WorkWave and Jersey Central Power & Light.
Adaptive reuse projects such as these are recycling and repositioning land sites, and effectively “pruning” the office inventory, as obsolete buildings are replaced by new office buildings or other land uses such as residential properties. This pruning is making the market on average newer and less suburban, which in turn is helping to lower availability. Over the long term, this trend should improve the overall quality of the inventory in New Jersey and result in greater potential for rent growth.
About Newmark Grubb Knight Frank
Newmark Grubb Knight Frank (NGKF) is one of the world’s leading commercial real estate advisory firms. Together with London-based partner Knight Frank and independently-owned offices, NGKF’s 14,100 professionals operate from more than 400 offices in established and emerging property markets on six continents.
With roots dating back to 1929, NGKF’s strong foundation makes it one of the most trusted names in commercial real estate. NGKF’s full-service platform comprises BGC’s real estate services segment, offering commercial real estate tenants, landlords, investors and developers a wide range of services including leasing; capital markets services, including investment sales, debt placement, appraisal, and valuation services; commercial mortgage brokerage services; as well as corporate advisory services, consulting, project and development management, and property and corporate facilities management services. For further information, visit www.ngkf.com.
NGKF is a part of BGC Partners, Inc., a leading global brokerage company servicing the financial and real estate markets. BGC’s common stock trades on the NASDAQ Global Select Market under the ticker symbol (NASDAQ: BGCP). BGC also has an outstanding bond issuance of Senior Notes due June 15, 2042, which trade on the New York Stock Exchange under the symbol (NYSE: BGCA). BGC Partners is led by Chairman and Chief Executive Officer Howard W. Lutnick. For more information, please visit http://www.bgcpartners.com/.