MAREJ-Hosted Event Focused on Development, Leasing and Investment
ISELIN, N.J., May 11, 2018 – Office tenants’ needs have changed dramatically over the last several years. The shift to community-centered, “live-work-play’ environments is signaling a new era in office building utilization that is here to stay, according to industry experts that recently participated in the Mid Atlantic Real Estate Journal’s (MAREJ) 4th annual New Jersey Office Conference. The event, which took place at the APA Hotel Woodbridge, brought together more than 100 of the region’s top real estate professionals, along with three panels of high-level commercial leaders representing all facets of the Garden State’s office market.
Evaluating the Office Market
During Q1 2018, 2.2 million square feet of office space was leased in Northern and Central New Jersey; the overall availability rate in those markets for all office types was 19.7 percent, the lowest it’s been since 2Q 2009, according to David Simon, executive managing director and market leader of Colliers International. Simon moderated a discussion entitled, “Market Update: An Evaluation of the Office Market and What Tenants Require Today,” which featured panelists Robert Rudin, vice-chairman of Cushman & Wakefield; Kevin Collins, managing director of asset management and finance for C&K Properties; Jonathan Schultz, co-founder of Onyx Equities LLC; Michael Bergman, principal and president/CEO of Bergman Real Estate Group; and Jeff Garibaldi Sr., president of The Garibaldi Group.
While there is no “one-size fit all” approach to meeting office tenants’ requirements, panelists said the Millennial and Generation Z workforce is having a dramatic impact on how office space is developed and used; landlords and property owners will continue to redevelop and rebrand properties to accommodate this younger generation of office user. The experts also discussed Newark’s emergence as a regional business hub, and the City’s bid as a location for Amazon’s HQ2 headquarters.
“Newark was a logical short list choice for Amazon due to the presence of two major train stations containing the Metro liner, NJ Transit and the Path lines in combination with an International Airport, major road networks and one of the most robust fiber networks in the Country,” noted Rudin, “not to mention over 40,000 students at the local colleges. When you combine the in-place infrastructure with the number of new development projects, the evidence for a major resurgence is in place. Four new residential developments in the Washington Park area, a new Dormitory on Halsey Street, the completion of Teachers Village, M&M choosing the Ironsides project for its corporate office and a new Marcus Samuelsson restaurant are but a few of the new developments. Thousands of new housing opportunities now stretch along the path line from Newark to Jersey City and into New York City. Lotus Equities and SJP properties have put stakes in the ground for the development of several million square feet of new office space.”
Panelists agreed that the New Jersey Economic Development Authority’s Grow NJ Assistance Program has been a key driver for the state’s office market. Grow NJ is a job creation and retention incentive program that strengthens New Jersey’s competitive edge against tax incentive programs in surrounding states. Businesses that are creating or retaining jobs in New Jersey may be eligible for tax credits.
Mixed-Use Projects: The Future of Office Development
A panel entitled, “Critical Capital Markets & The Future of Office Development,” was moderated by Jeremy Neuer, executive vice-president of CBRE. Panelists included Edwin H. Cohen, principal partner of Prism Capital Partners; Jose R. Cruz, senior managing director of HFF; Fahri Ozturk, vice-president of investment for Marcus & Millichap; Timothy Touhey, CRE team leader for Investors Bank; and Roger Smith of Gensler.
Walkable mixed-use communities that bring together retail, office and housing represent the future of commercial development, according to the panelists. Illustrating this trend, they cited Prism Capital Partners’ ON3 – the 116-acre, former Hoffmann-LaRoche campus redevelopment spanning the Township of Nutley and City of Clifton. The project is positioned to set a benchmark in Walking Urbanism, integrating office and R&D facilities, recreational, hospitality and wellness options.
“We saw this site as the ultimate ‘blank palette’ to create something truly special,” Cohen said. “ON3’s location, nine miles from Manhattan and located directly in the center of two major north/south highways, on a highway where 170,000 cars pass each day, presented an opportunity to develop an ideal ‘live-work-play’ lifestyle hub. We are confident that upon completion, ON3 will be the greatest mixed-use development in Northern New Jersey.”
Successful mixed-used projects are those that generate a sense of community, and a “24-7” lifestyle experience. The adage “location, location, location” also rings true when developing office product, and the Garden State’s proximity to Manhattan is among its benefits, Cohen added. “In the past, a large corporation would build a suburban campus and the labor force was guaranteed to come.” “If you look at suburban campuses built many years ago and tried to create a work-play setting there today, it wouldn’t work. The success of these projects depends on location, highway access and demographics.”
The Value of Tenant Improvements
“The Value of Tenant Improvements in Securing a New Lease and Retaining Tenants,” included moderator Jan Alan Lewis, a member of Cole Schotz P.C., along with panelists Jerry L. Barta, vice-president/director of leasing and marketing for Alfred Sanzari Enterprises; Nick Shears, director of leasing and marketing for Hugo Neu Corporation; Kenneth Latal, outreach team manager for New Jersey’s Clean Energy Program; and Tom Hofmann, project manager for DMR Architects.
Barta cited the importance of collaboration between tenant and landlord when addressing buildouts and other improvements. “As a landlord, it’s important to understand what each tenant needs and wants,” he said. “While there are some common denominators, every tenant has different requirements specific to how their company operates,” he said. “It’s our job to listen to the tenant, understand what they want, and come up with a plan in conjunction with the architect that satisfies the tenant’s needs.”
Companies use office space not only to run their business, but to attract talent and retain existing employees, according to Barta. “Creating an environment that’s inviting and conducive to running a business is a significant function of office space today. If employees are productive and happy, that’s a positive for the business owner as well as the landlord.”
Beyond individual tenant spaces, building amenities play a role in attracting and retaining tenants. Increasingly these perks are going beyond basic fitness centers and cafeterias, panelists said. Ample parking, shuttles to public transportation, shared conference facilities, concierge/shipping centers, expansive outdoor spaces, data centers, and generators to minimize disruptions following power outages increasingly are sought-after by companies, as are lighting and HVAC upgrades that keep workers comfortable and productive. “Wellness zones” ranging from quiet places for meditation to nature-inspired décor and energy-efficient sensor lighting also are trending.