Meeting the Challenge of Vacant Office Space
By Joseph J. Maraziti, Jr., Esq.
Former Chairman of the State
New Jersey's suburban communities are facing a new challenge. With increasing frequency, New Jersey’s classic suburban office park are emptying. Examples abound: Pearson Education is moving from Upper Saddle River to a Hudson River site in Hoboken. Panasonic is leaving its Secaucus location for an office tower under construction in downtown Newark; Merck is moving many if its workers from its palatial Whitehouse Station campus to Kenilworth; Honeywell will relocate its world headquarters in Morris Township to a newly built, but never occupied, office facility in Morris Plains. Indeed, the five-story office building in which I’m writing this article is approaching a 45 percent vacancy rate!
In short, half empty and empty office buildings dot many of New Jersey’s suburban communities. And the problem isn’t getting any better. But they are too important to the local and state economy to allow them to lie fallow for very long.
Half empty and empty office buildings dot many of New Jersey’s suburban communities. And the problem isn’t getting any better. But they are too important to the local and state economy to allow them to lie fallow for very long.
The causes of this recent phenomenon are both multiple and debatable. One factor is that many of these once state of the art office facilities have aged, lack energy efficiency and do not otherwise meet the needs of today’s businesses. Another is the preference of the new generation of workers for a more vibrant, lively and public-transportation friendly urban setting. In fact, that consideration was cited by Pearson executives when the move to Hoboken was announced a few months ago. Access to public transportation is an added factor.
Vacant office buildings can gradually lead to an overall decline in property values - and thus tax revenue—for the entire town. Tax appeals and reduced assessments bode ill for the municipal coffers. The building that Pearson Education is leaving in Upper Saddle River is assessed at about $43 million.
A comprehensive report documenting the changing preferences that are driving the exodus from suburban buildings was published a few months ago by Dean James Hughes and
Professor Joseph J. Seneca, Edward J. Bloustein School of Planning and
Public Policy at Rutgers, entitled: “Reinventing the New Jersey Economy: New Metropolitan and Regional Employment Dynamics.” http://policy.rutger.edu/reports/rrr/RRR33dec12.pdf.
More and more New Jersey municipalities face this growing trend and need to figure out how to respond. Developers are beginning to seek zoning changes to convert these buildings and/or sites to residential use. Many town officials worry about the impact of an influx of new residents on schools and other public services. Should they resist such requests for rezoning and hope the market comes back?
While it is tempting to turn a blind eye toward these requests, there are dangers lurking in that response. If left vacant, these buildings can become “black holes” that drain the energy and vitality out of parts of the community that are typically in high-profile locations. This effect can taint other properties and gradually lead to an overall decline in property values— and thus tax revenue—for the entire town. Tax appeals and reduced assessments bode ill for the municipal coffers. The building that Pearson Education is leaving in Upper Saddle River is assessed at about $43 million.
This is the site of new Pearson Education Tower in Hoboken. The preference of the new generation of workers for a more vibrant, lively and public-transportation friendly urban setting was cited by
Pearson executives as one reason for the company’s move.
The locations occupied by these buildings are desirable and treasured ones for a couple of reasons. First, for the most part, they are in areas with extensive and functioning infrastructure. They are most often served by public water and sewer and are near highways and sizeable road networks. Some are not far from public transportation. But, more importantly, in a state with rapidly diminishing areas for growth, they occupy real estate that can absorb the development opportunities that have shrunk in recent years as a result of powerful preservation initiatives. While these initiatives are important and beneficial, they have removed great swaths of the landscape from significant development.
I served on the State Planning Commission when the current State Development and Redevelopment Plan was adopted in 2001. In the relatively short time since then, a series of steps have been taken to promote preservation in key areas of the state which have reduced the areas available for growth to take place.
These actions include: (1) the approval by voters in every county of the state of a Referendum proposed by Governor Whitman to spend $1 billion over ten years to acquire one million acres of open space and farmland; (2) the adoption of the Highlands Act which establishes a strict development regime for over 853,000 acres in northern New Jersey; (3) the acquisition of open space by counties and municipalities throughout the state with the use of Open Space Trust funds; (4) similar acquisitions by non-profit organizations; (5) the designation of multiple miles of Category One streams, which restrict development within a 300 foot buffer on each stream bank and (5) the adoption of more stringent storm water regulations. Finally, (6) the contribution that Superstorm Sandy has made to the list of sites that can no longer be developed will become clearer as time goes by.
What do these historic changes in the use of the New Jersey landscape have to do with the decline of the suburban office campus? Everything. In order for the economy to be vibrant and to grow, the state will need to harness all its assets to develop in the right place and in the right way. These sites provide one of a number of resources to address this need.
The creative re-use of these buildings can provide multiple benefits. In some cases, as happened in Morris Plains, the building that Pfizer built at great expense for its own use, but never fitted out or occupied, will soon be transformed into the world headquarters for Honeywell. At Metropark, CENTRA stripped a 110,000 square foot outdated office building and created an energy efficient award-winning design that has been credited with spurring improvements at other buildings in the neighborhood.
In other cases, there will be opportunities to transform these sites—and maybe the buildings too—from single purpose part-of-the-day uses to multiple uses, such as a combination of retail, office, residential and public purposes. Mixing activities of that type in one location is not a radical idea. In fact, until the rise of suburbia after World War II, such combinations were the norm and not the exception. The separation of residential from retail and both from office use is a relatively recent practice. While mixed use development and/or redevelopment won’t work everywhere, where it does make sense, there are multiple benefits.
For starters, parking can serve some uses during the day and others at night. Round-the-clock activities in one location not only make for a more efficient use of land and infrastructure, but it also makes for a more interesting and lively neighborhood vibe. Instead of the exodus at closing time, which leaves these building lurking in darkness through the night, the area can include parks, restaurants, cafes and entertainment venues. On the upper floors, condos and apartments can provide housing for New Jersey’s growing population. Round-the-clock communities have been developed successfully, such as the Washington Town Center. Others are in the planning stages, such as the Ewing Township Parkway Avenue Redevelopment Plan, which focuses on the former General Motors site.
The challenges are daunting, but with creativity and a fresh look at options, there can be a big payoff, not only for the locality, but for New Jersey as well.
Joseph J. Maraziti, Jr. serves as Special Redevelopment Counsel for municipalities throughout the state and was the Chair of the State Planning Commission 1998-2001.
Originally published in New Jersey
Municipalities, Volume 90, Number 6, June 2013