“Oversupplied and under-demolished”

From the Star Ledger:

Diamonds to dinosaurs: NJ towns struggle under weight of massive office park vacancies

They’re visible from many New Jersey highways – hulking, seemingly endless structures surrounded by oceans of asphalt parking lots and carefully planned landscaping.

Merck Headquarters in Readington. The former Bell Labs complex in Holmdel. Hoffman La-Roche’s main campus in Nutley and Clifton. There are countless others.

Once, they represented New Jersey’s boom times; commercial palaces built mostly in the 1980s and 1990s that served as professional homes for new residents in the state’s ever-expanding suburban sprawl.

But as technology leapt forward and the Great Recession knocked New Jersey backward, the state’s large office campuses symbolize a shifting economy.

About a quarter of New Jersey’s office space currently sits vacant, eroding municipal tax bases by tens of millions of dollars. Experts say companies are now gravitating toward more compact offices with collaborative workspaces in downtowns and away from the large, cubicle-heavy spaces so common in the state’s suburbs.

“This is a sea change, and we’re only at the very, very beginning,” said Jeffrey Otteau, a real estate analyst and president of the Otteau Valuation Group in East Brunswick. “We’re not in the 80s anymore. This is a broad change, and its impacts are going to be sweeping.”

The companies that helped build New Jersey’s commercial real-estate foundation decades ago are no different. In the last decade, many of the state’s largest commercial taxpayers, such as Roche and Merck, have undergone reorganizations and have chosen to depart from the monolithic structures they once had built.

It leaves their host communities with real-estate white elephants and huge holes in their budgets.

“I think the worst news in the world you get as a mayor is notice from one of your largest corporations that they’re going to be moving out,” said Bill Dressel, director of the New Jersey League of Municipalities. “The implications of those decisions have a direct impact on not only your tax base but the quality of life in your community.”

Companies like Merck and Roche have been actively involved in trying to market their properties. But according to James Hughes, dean of the Bloustein School for Planning and Public Policy at Rutgers University, would-be tenants aren’t exactly beating down the doors of towns that have one million square-foot office campuses available.

“The decision makers now have to worry about the Millennials. That old suburban pattern was linked to the fabled baby-boom generation. Now, Millennials, they don’t remember the bad old days of public transit, they don’t remember the urban despair of the 70s.”

“And they don’t find plain, vanilla office buildings very attractive.”
About 80 percent of all the existing office space in New Jersey was built in the 1980s, Hughes said, and much does not fit the interactive, more compact work environment in walkable, urban communities that companies are seeking.

“The suburban market is oversupplied and under-demolished,” he said.

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16 Responses to “Oversupplied and under-demolished”

  1. Comrade Nom Deplume, Guardian of the Realm says:

    Meanwhile the tech giants are building out the same thing, just not in Jersey.

  2. phoenix says:

    They will make great senior citizen homes.

  3. They will make great compounds for armed gangs who roam the country.

  4. Fast Eddie says:

    “The suburban market is oversupplied and under-demolished,” he said.

    When I pass some of these abandoned corporate parks, they remind me of those images on the news of bullet ridden buildings in a Middle Eastern war zone. But, I suppose the unabated and uncoupled rise in residential property taxes will fill the financial void because… well… you don’t have a choice.

  5. Ben says:

    This is where a fast foreclosure process is crucial. If we let them go into default, someone sweeps them up cheap and can charge lower rents. Businesses then move in. Instead, we are hell bent on chasing every business out of this state and also preventing any new ones from starting up.

  6. Michael says:

    It’s a naive theory, but could it make sense that people flock to urban or suburban based on what’s newer? When the cities were run down, and the suburbs were new, everyone flocked to suburbs. Now that the suburbs are older, and the urban areas redeveloped, people are flocking back to urban areas. So basically people are just flocking to whatever is being developed that decade. I know it sounds stupid, but it could make sense. Sort of like the ckn and egg argument, do the developers drive development or does the consumer? You can say the developer is building based on consumer needs, but at the same time, it’s like this, put a new shiny toy and an old toy in front of the kid. Which one will he take? Are adults any different when purchasing a place to live? Go live in the old run down neighborhood, or the new redeveloped neighborhood?

    Please don’t call me an idiot for this analysis. I’m just thinking about it from another angle.

    ““The decision makers now have to worry about the Millennials. That old suburban pattern was linked to the fabled baby-boom generation. Now, Millennials, they don’t remember the bad old days of public transit, they don’t remember the urban despair of the 70s.”

    “And they don’t find plain, vanilla office buildings very attractive.”
    About 80 percent of all the existing office space in New Jersey was built in the 1980s, Hughes said, and much does not fit the interactive, more compact work environment in walkable, urban communities that companies are seeking.”

  7. chicagofinance says:

    I’ll give you a chicken or egg puzzle…….which one of your lobes failed first, the Frontal or the Parietal?

    Michael says:
    June 29, 2014 at 10:06 am
    It’s a naive theory, but could it make sense that people flock to urban or suburban based on what’s newer? When the cities were run down, and the suburbs were new, everyone flocked to suburbs. Now that the suburbs are older, and the urban areas redeveloped, people are flocking back to urban areas. So basically people are just flocking to whatever is being developed that decade. I know it sounds stupid, but it could make sense. Sort of like the ckn and egg argument, do the developers drive development or does the consumer? You can say the developer is building based on consumer needs, but at the same time, it’s like this, put a new shiny toy and an old toy in front of the kid. Which one will he take? Are adults any different when purchasing a place to live? Go live in the old run down neighborhood, or the new redeveloped neighborhood?

    Please don’t call me an idiot for this analysis. I’m just thinking about it from another angle.

    ““The decision makers now have to worry about the Millennials. That old suburban pattern was linked to the fabled baby-boom generation. Now, Millennials, they don’t remember the bad old days of public transit, they don’t remember the urban despair of the 70s.”

    “And they don’t find plain, vanilla office buildings very attractive.”
    About 80 percent of all the existing office space in New Jersey was built in the 1980s, Hughes said, and much does not fit the interactive, more compact work environment in walkable, urban communities that companies are seeking.”

  8. grim says:

    Who needs office buildings? Archaic temples to paper.

    I remember years back, when it didn’t mean anything unless it was on paper. Today? What’s paper? It’s amazing how fast that happened. 20 years ago there were nothing but miles of file cabinets. AP, Payroll, Finance, HR, you were entombed in it. Grew so large that entire industries were born to deal with the paper monster. One wasn’t good enough, we needed it in triplicate, and everyone with their own copy. I bet paper outweighed engineers at Bell Labs a hundred to one.

    No more.

    So again, why do we need to preserve these temples to paper?

    I knew a guy who was in charge of the mailroom at a major local pharma.

    Mailroom?

    It’s amazing, they got a truck twice a day filled with plastic cartons, they manually sorted and filled carts with the paper and then proceeded to have a small army walk around campus with the things. He was a big shot, vice president of mail delivery or something. You should see the records they kept. He probably had 100 people working for him across the tri-state area, a hundred little carts.

    Funnier yet, back then they thought the biggest threat were little robots that were going to deliver the mail. Amazing how short sighted we are.

  9. Fast Eddie says:

    Amazing how short sighted we are.

    Indeed! Look at all the muppets that signed contracts to feed squirrels, bought sight unseen and were told, “It’s different here.” Hey, anybody wanna buy some tulip bulbs?

  10. Fast Eddie says:

    Here’s something interesting; try to name how many industries will die if the home office becomes more and more a reality. Why do we need any office space? I can have two monitors set up, a webex session and a conference call right from that “extra room” off the living room. No commuting costs, no gas, no wear and tear, no lunch to buy, etc. That’s a lot of adjustment.

  11. chicagofinance says:

    The flip side is that people will to pound pavement, give a handshake in person and make eye contact will be differentiated and valued……….I just told a millenial financial advice social media page to remove me because it was a waste of my time…..he was incredulous……”…but we are growing?” …my response was “so?”

    Fast Eddie says:
    June 29, 2014 at 10:48 am
    Here’s something interesting; try to name how many industries will die if the home office becomes more and more a reality. Why do we need any office space? I can have two monitors set up, a webex session and a conference call right from that “extra room” off the living room. No commuting costs, no gas, no wear and tear, no lunch to buy, etc. That’s a lot of adjustment.

  12. chicagofinance says:

    will = willing

  13. Comrade Nom Deplume, a.k.a. Captain Justice says:

    [7] chifi

    I know you don’t like the guy but it isn’t that idiotic a suggestion. New=improved?

    Michael–do not for one second think that I don’t consider your opinions naive.

  14. nwnj says:

    Baffling statement considering MO has the highest tax rate in the county. Maybe that’s just code for massive increase.

    But no company will move into these vacant behemoths when they know the towns are licking their chops waiting for for that payday. Anyone with the mass to occupy that amount of space is sure going to work the tax abatement, credit, etc., or they won’t come. Bring on the wrecking ball is right.

    “The assessment started spiraling down slowly,” said Jack Marchione, Mount Olive’s Tax Assessor. “We’re lucky we have a lot of ratables that offset that loss.”

  15. Fabius Maximus says:

    #8 grim

    The odds of the C level giving up the corner office for the Home office, is zero. Until that happens your palaces will continue.

  16. Fabius Maximus says:

    Just dropped in to drop this gem off for those that were blowing off when Merkel pulled the plug on nuclear. For me I still see nuclear as a viable option, but 50% is ground breaking. But hey, let’s hear a big Solyndra from the haters!

    http://www.thelocal.de/20140619/germany-produces-half-of-electricity-needs-with-solar-power

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