NAIOP New Jersey: Panel of Experts Offers Solutions for Re-Imagining Suburban Offices

Market's Future is Topic of Discussion at Commercial Real Estate Development Association's Chapter Meeting
By: Caryl Communications
 
NEW BRUNSWICK, N.J. - March 26, 2013 - PRLog -- With a 25% plus suburban office vacancy rate, aging building stock, and a preference by a new generation to work in amenity-driven urban settings, are New Jersey's suburban offices still viable? "Dinosaurs or Diamonds? Re-Imagining New Jersey's Suburban Office Spaces," was the title of a topical presentation at NAIOP NJ's March chapter meeting at The Heldrich in New Brunswick.

"This program was inspired by the Rutgers University report, ‘Reinventing the New Jersey Economy,' issued at the end of 2012," said Michael McGuinness, CEO of NAIOP NJ. "The changing economic and workforce demographic landscape has a direct impact on New Jersey's office market, and it is a challenge that we need to address."

As a prelude to a panel discussion on re-inventing the state's office product, Dr. James Hughes of The Bloustein School at Rutgers, who co-authored the report, described how the state now needs to dramatically change itself to "adapt to a new demographically inspired geographic reality."

"The 1980s saw an office building boom that became the nation's cutting-edge growth model with its development along auto-dependent corridors," Hughes explained. "At the same time, from 1980 to 2000, New Jersey was transformed from an aging industrial economy to an information-age economy.

"In 1989, the office building boom turned to bust, and much of New Jersey's office market was set in concrete," he said. "The Internet came next, fostering a dramatic change in companies' business plans, including worker displacement and a need to upgrade office building infrastructure. By 2007, a new era dawned, with iPads, tablets and iPhones unshackling workers, who were no longer geography- or cubicle-tied."

And while the baby boom generation had fueled the earlier suburban development, echo boomers - offspring of the baby boomers, "are tech-savvy and like urban settings," Hughes said. "The suburban corridors won't necessarily be gone, but times have changed."

The questions Hughes raised - How can the market and the economy adapt? How are interior work spaces changing? Can municipalities grasp the economic and fiscal impact of the changing environment? - were addressed by a panel of top developers. The discussion was led by Brian Whitmer of Cushman & Wakefield.

Tom Michnewicz of Somerset Development focused on his company's ongoing involvement with the two million-square-foot, 472-acre former Bell Labs complex in Holmdel, N.J., which successor Alcatel Lucent vacated in 2007. His company has a long history of repositioning buildings, notably the former Curtiss-Wright property in Woodbridge, N.J.

Michnewicz addressed the municipal aspect. Somerset is negotiating with Alcatel Lucent to buy the property, and after six years recently won initial approval from the township for its redevelopment plans, an approval that came after local concerns over such issues as traffic were addressed and four years of negotiations with local officials.

"We took it to the people, many of whom wanted ratables," Michnewicz said. "We convinced the town that the site has a lot of potential, and we will be making improvements to recreate it as a town center."

The repositioning of the Bell Labs complex calls for a mix of residences, including affordable housing, both inside and outside of the main building, with Avalon Bay, Pulte Homes and others expressing interest. The building's signature 70-foot tall atrium will re-emerge as a pedestrian promenade.

The heart of the project, according to Michnewicz, will be its retail component, anchored by a 65,000-square-foot supermarket. Other components will include a 400,000-square-foot medical facility encompassing a health and wellness center, surgery center, and an assisted living center.

"We are getting a lot of interest regarding the health and wellness component," said Michnewicz.

Finally, a hotel and conference center and educational facilities will round out the rebirth of the historic Bell Labs complex.

Somerset is also developing Wesmont Station in Wood-Ridge, N.J., a 70-acre mix of retail, residential and community facilities including a new middle school. The project will also include a new New Jersey Transit train station.

Responding to a question from Whitmer about common themes of repositioning single-tenant buildings, Paul Teti of Normandy Real Estate Partners noted such interior changes as, "moving offices into the interior and creating a window line for group uses." But beyond that, there are such questions as, "does the location work?" In particular, mass transit "is critical," he said, noting his company's redevelopment of the former Summit Medical Center as the Summit Executive Center.

"It is a solid, in-fill site with accessibility, with such on-site amenities as food service, a conference center, efficient floor plates," Teti said. The net result: "It was 100 percent leased when the building was delivered."

Normandy has also been credited with the turnaround of Center 78 in Warren, formerly known as 184 Liberty Corner Rd. and long vacant. The bottom line for these and other projects is, "as echo boomers mature, they want amenities close by," said Teti. "High quality suburban locations with access, health and fitness, upscale food service provide opportunities that will work if you deliver those amenities, plus efficient floor plates, and create the workplace standards that today's tenants want. For tenants, these are all important features in recruiting."

And for Mountain Heights Corporate Center in Berkeley Heights, N.J., a former AT&T facility, "we saw the opportunity to work with the site's grade to open up the facility," said Sam Morreale of Vision Equities. The Mountain Heights Corporate Center project included getting approvals to add a 27,000-square-foot fourth floor, revamping the interior and redoing the mechanicals.

Vision Equities is also redeveloping the former Alcatel Lucent property in Whippany, with Bayer Healthcare's North American headquarters occupying 95 acres of the 194-acre site. Later this year, approximately 2,500 Bayer employees will move in, consolidating several locations.

"The project for Bayer involves a partial tear-down and redevelopment of existing buildings, with a lot of air, light, and connectivity," Morreale said. "It's what discriminating tenants are looking for, and you have to be creative and listen to what these tenants want.

"The problem properties in the marketplace are not all ‘dinosaurs'," he said. "They're opportunities. The challenge is to go back in and re-invent the building. There are economic implications, and our industry is changing with the biggest challenge being to keep the economy going.

"The key is to understand the dynamics of what tenants want, and these properties should bring to market a value proposition," Morreale said. "Some buildings will have to come down, even if to create green space as an amenity for other buildings. Others provide the opportunity to repurpose key assets to recapture the suburban market."
End
Source:Caryl Communications
Email:***@caryl.com Email Verified
Tags:Industrial, Commercial, Suburban, Office, Development
Industry:Real Estate
Location:New Brunswick - New Jersey - United States
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