Northern and Central New Jersey are the top choice office locations for many businesses in the state. These areas are becoming increasingly appealing for start-ups to Fortune 500 companies. Building on last year’s upward movement, there has been a steady demand for these locations in 2017.
The slow job growth of previous years contributed to a spike in office building vacancies all over the state of New Jersey. Many buildings sat unused, becoming functionally obsolete. North and Central New Jersey were not immune to this problem. However, today there is a bright light at the end of the tunnel. And it is shining on these areas of New Jersey. Experts are advising that more companies will continue to choose this area as their home base. The reasons behind this trend are becoming more obvious. Forcing developers to pay close attention to those reasons as they seek to provide the best New Jersey office space.
Access to Transit
The outlook for commercial real estate remains positive for Northern and Central New Jersey’s urban and suburban transit hubs; including Hoboken, Jersey City, Morristown, Metropark, Newark, New Brunswick, Princeton, and Summit. Employers are finding value in these locations, therefore demand for office space in these cities and towns persists. So, why are companies finding these areas so appealing? The answer—companies are looking for space options to appeal to their workforce. These amenity-rich areas with their conveniences including accessibility to mass transit, make them an ideal solution when searching for office space. According to Curtis Foster, Executive Vice President of Cushman & Wakefield, (East Rutherford) “Demand is trending upward, especially in the urban and transit centers.”
Another explanation for renewed interest in North and Central New Jersey commercial real estate is the area’s promise of even more, like-new renovated buildings. “Zombie buildings” or vacant buildings are expected to be in the crosshairs of developers. That will then refit them with the elegant upgrades and amenities tenants are looking for today. According to Real Estate NJ: The Commercial Real Estate Voice of New Jersey , “With more than one-half of the 160.0-million-square-foot Northern and Central New Jersey office market developed during the 1980’s and an overall vacancy rate ranging near 25.0 percent for more than five years, empty buildings will be targeted for demolition to make way for new projects or converted to alternative uses in 2017″.
The expectation is such renovations to older buildings will continue into the new year. Causing developers, property owners and municipal leaders to work together to transform vacant or under-used, suburban office parks into office spaces with more of an urban feel and metro vibe. Commercial real estate is being converted in Central New Jersey counties. Morris, Monmouth and Somerset to name a few.
Builders are creating what they call “mixed-used” developments where they modernize an old office or lab space while adding housing, hotels, retail space, restaurants and recreation amenities. A prime example of one such conversion is the former Bell Lab headquarters in Holmdel, New Jersey. Somerset Development, has transformed the former lab into a mixed community they call, Bell Works. This approximately $200-million-dollar redevelopment has transformed what was once the largest vacant office building in the U.S. into a robust and exciting “work-play-live” community.
One of the first tenants, WorkWave, found Bell Works to be exactly what they needed when they were searching for a vibrant new headquarters. One that would attract the best and brightest employees. WorkWave, who occupies 72,000 square feet, began the influx of technology companies that have taken office space at the two-million-square-foot property. Ralph Zucker, the president of Somerset Development, when referring to Bell Works’ many amenities, stated; “The intent is to create a decidedly urban downtown feel across the center’s main level promenade”. Developers such as Somerset are recognizing that the office space of old will no longer suffice for today’s Millennial employees; who are demanding more from commercial real estate landlords.
Sought after destinations like Bell Works in Central New Jersey are also appearing upstate. For example, Mack-Cali Realty Corporation is investing approximately $100 million in upgrades. Upgrading their properties in Metro Park, Paramus, Short Hills and Jersey City in order to offer first-class office properties; that they refer to as cities within cities. Appealing to Millennials seems to be more than a trend today.
Demand from Millennials
Millennial demand may also be responsible for North and Central areas claiming the title of the best New Jersey office locations today. There is no question that this group is having an impact on commercial real estate trends. Now the largest age group in the nation, with an estimated 83.1 million individuals, millennials effect our economic trends. So why not our commercial real estate trends too?
Classified as the group of individuals born between 1982 and 2000, Millennials represent more than one quarter of the population. This group wants to be located in “transit-based locations, especially on the Hudson waterfront,” reports Andrew Marshall, Mack-Cali’s Chief Operating Officer and Executive Vice President for development. “Millennials have embraced the concept of “live, work, play”. They now expect that the place where they live will be in close proximity to where they work and play”. Millennial workplaces ideally should include amenities and conveniences that a North and Central office space can provide today. Being close to New York City and Philadelphia are also key for Millennials.
Yes, urban workplaces are attractive to Millennials. But New Jersey’s urbanized suburban areas offering convenient mass transit are holding their own appeal. Robert Rudin, a Vice President in the commercial real estate offices of Cushman & Wakefield, believes that successful development in these suburban areas will be assured if developers include in their master plans, many amenities such as sidewalks, bike paths, shopping areas, health clubs, cafés, restaurants, and more. All these features are musts for Millennials.Historically, most of Northern and Central New Jersey commercial real estate housed the banking/financial services and pharmaceutical/life science businesses. However, in 2017 the information technology companies are realizing that some of the best offices spaces in the state exist in North and Central New Jersey. Including the highly praised, aforementioned Bell Works. In fact, the high-tech sector accounted for one quarter of leasing activity last year. The expectation stands that these companies will continue to generate significant activity in these trending areas. The proximity to cities such as Manhattan and Philadelphia is once again a reason for the sustained interest in the North and Central New Jersey office market.
The Job Market
The strong job market is another factor that will keep these areas in business. Northern and Central New Jersey office locations, such as Jersey City, Monmouth County and Bergen County are sure to see long-term growth. Simply because they are less expensive when compared to New York City and are located within 30 minutes of Manhattan. Proximity, safety and transportation will ensure these areas in New Jersey continue to flourish in the future.
So, what does the future look like for the office market in New Jersey? Will the Northern and Central areas continue their rise to fame as the best and hottest locations in the office market? All indications point to yes. A building boom is happening right now across the water from New York City. New Jersey, with its cheaper land prices, is the more attractive option to New York City. Also, a lack of inventory in NYC is contributing to the demand for office space in Northern and Central NJ.
Northern and Central New Jersey locations will remain strong. As long as landlords continue to build or refit office spaces with the desired amenities that tenants, especially Millennials, are looking for in 2017 and beyond. Also, employers who search out these pleasing workspaces, will no doubt attract and keep quality workers. When it comes to finding the best place to work or live, real estate professionals have long emphasized location, location, location. The same applies to finding the ideal New Jersey office space. Northern and Central New Jersey fit all of the criteria that today’s tenants desire.