From the WSJ, hat tip Chi:
Casualty of Cities’ Resurgence: The Suburban Offices Left Behind
Companies from General Electric to Weyerhaeuser are pulling their headquarters out of leafy suburban campuses and moving to downtown high-rises, giving cities an economic jolt.
But figuring out what to do with the vacant corporate campuses left behind is a quandary for civic leaders and landlords across the U.S. Towns have pondered turning them into gyms, community centers or education facilities, but finding large tenants for such spaces has proven difficult, and nearby residents often resist plans to build dense apartment complexes on empty sites.
Upper Saddle River, N.J., 30 miles northwest of Manhattan, is a prime example of the headaches involved. The wealthy town of about 8,000 people is locked in a standoff with a landlord over how to reuse the former U.S. headquarters of publisher Pearson Education.
The bunkerlike structure of gray concrete, set on a grassy 47-acre plot, was built in 1973 for Western Union when the telegraph company decamped from Manhattan, instantly becoming a fixture of the town.
That began to change four years ago, when the division of U.K.-based Pearson PLC, the building’s last tenant, decided to move its operations to Manhattan and Hoboken, N.J., in a bid to be closer to public transportation and appeal to a younger, urban-dwelling workforce. That left landlord Mack-Cali Realty Corp. with an empty 470,000-square-foot building—and few prospects in sight.
The site had earlier brought Mack-Cali annual revenue of about $8.6 million, but after testing the market, the landlord found no demand for an aging, isolated building in a region already inundated with empty office space. So it pushed a plan to demolish the structure, built to hold as many as 2,000 workers, and replace it with a mixed-use development mostly consisting of apartments.
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But for a town filled with large houses and winding streets, the idea of replacing the office building with a dense collection of 240 apartments was less than welcome.Residents and borough officials including the mayor have been outspoken in their opposition, and locals overwhelmingly rejected the landlord’s plan in a 2014 vote. Mack-Cali sued the town in federal court, alleging racial bias over opposition to its apartments, which include some units for low-income residents.
“It looks out of place—you’re going to overpopulate the area,” said Eric Halpern, a resident whose property abuts the complex. He prefers a mixed-use development but one that is less dense, an idea Mack-Cali has avoided in part because it would mean losing some value.
Similar clashes are flaring up around the country as the preferences of American corporations undergo a shift. A number of companies that once followed their workers to the suburbs in the second half of the 20th century are reverting to urban areas as major cities have revitalized and become magnets for a generation of young professionals.
Not all suburbs are struggling. Silicon Valley, for example, is booming thanks to growth by U.S. technology giants.
But the roster of well known companies moving back to cities is growing. The latest was General Electric Co., which recently said it would leave Fairfield, Conn., for Boston. Packaged-foods company ConAgra Foods Inc. announced a move last year from a spacious Nebraska campus to downtown Chicago. Timber giant Weyerhaeuser Co. opted to leave a bucolic headquarters south of Seattle for the downtown.
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Northern New Jersey has been the epicenter of this trend, dotted with abandoned homes of corporate giants.Communities and landlords throughout the area are struggling with finding new uses for the buildings. A developer in Holmdel, N.J., has an ambitious plan to turn the 2-million-square-foot former Bell Labs headquarters into a mix of apartments, shops and offices for multiple tenants.
German chemicals company BASF’s former North American headquarters in Mount Olive, N.J., sits vacant, as does the 500-acre former home of drugmaker Merck & Co. in Readington, N.J.
Adding to the quandary, the once-thriving office parks often were big tax- revenue generators, while uses like apartments tend to bring in substantially less. In Upper Saddle River, the Pearson site brought in more than $900,000 a year, a big chunk of tax revenue for the small town.
“All of a sudden it’s very hard to replace that tax base,” said Mr. DeMarco of Mack-Cali. Offices, he added, “are an innocuous use—they don’t bother you on the weekend. It’s not like retail or hotels.”
