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Renovations proving to be the difference in moving outdated real estate properties

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Transwestern executives Jim Postell, left, and Matt McDonough.
Transwestern executives Jim Postell, left, and Matt McDonough. - ()

In a state that's rife with 30-year-old office space, a little touch-up can go a long way.

That's exactly what the owners of some of New Jersey's older, outmoded buildings have been finding out. In a market where tenants are still at a premium, some landlords have opted for a series of strategic, largely cosmetic improvements such as renovated lobbies, refurbished common areas and modernized amenities.

The results have been tough to ignore, experts say, especially in suburban markets that have struggled with high vacancy since the recession.

"The buildings that have the improvements are the ones that are winning," said Richard Mirliss, an executive managing director in Colliers International's Parsippany office. "And they're the ones that are commanding higher rental rates."

At 300 Kimball Drive in Parsippany, a 400,000-square-foot building that was vacated by State Farm Insurance in 2012 is now on its way to being fully leased, according to the brokerage firm managing the property. The firm, Transwestern, oversaw a yearlong, $3.4 million project to modernize its lobby, fitness center and cafeteria, while refurbishing its 20 restrooms and making improvements outside the building.

"It just wasn't inviting," said James Postell, principal of Transwestern's New Jersey office. "So we had to create it."

Fiserv, a financial services technology firm, is expected to move into a 78,000-square-foot space in August. And Transwestern said it has pending leases with other tenants ranging from 26,000 to 225,000 square feet.

The building, constructed in 2001, is certainly not that old compared to others in New Jersey. The average age of New Jersey's more than 2,000 office buildings is about 34 years, according to Cushman & Wakefield.

The newly renovated lobby at 300 Kimball Drive in Parsippany brings daylight to the core of the building.
The newly renovated lobby at 300 Kimball Drive in Parsippany brings daylight to the core of the building. - ()

But Transwestern Managing Director Matthew McDonough noted there's been a "big change in design" since 300 Kimball was drawn up in the 1990s, with concepts that called for heavy wooden walls, brass and dark marble.

"When you see the more modern buildings nowadays, the colors are lighter, and even the weight of the materials is lighter," McDonough said. "Everything is just much slicker and cleaner … There's been a real change in the aesthetics."

While renovations are certainly less expensive than new construction, they still carry risk when they're done on a speculative basis. That risk was amplified for landlords who did so during the downturn, said Robert Martie of Colliers International.

But that didn't stop anyone who sought to stay ahead of the market.

"The way they read the tea leaves was that, in order to grab the limited amount of activity that was out there, they had to get brave and spend the capital to reposition their buildings," said Martie, executive vice president for Colliers' New Jersey region. "What we have found now, in hindsight, is that those that did have had success."

That group includes Alfred Sanzari Enterprises, which started a $6 million improvement program at its Glenpointe complex in Teaneck in 2007. The move came after three large tenants left around the same time, bringing occupancy to about 65 percent.

Jerry Barta, the firm's director of leasing, said the project was not necessarily a direct response to the vacancy — and the structure was in good shape — but Sanzari still saw a need to modernize the office space and the adjoining hotel.

"You want the tenants to feel good about where they go to work. A happy employee will be a productive employee," Barta said. He added that for a business, having a sleek, modern lobby and work space also "portray success to potential clients and existing clients."

That led to a series of "purely aesthetic (renovations) … that tenants can see and touch," such as floors, wall treatments, lighting and seating areas at Glenpointe, he said. It also included the addition of modern features such as Wi-Fi and flat-screen televisions in common areas.

Today, Glenpointe is nearly at zero vacancy, Barta said.

Landlords elsewhere now hope to follow a similar model, Mirliss said. In Little Falls, Colliers is overseeing a multimillion-dollar renovation of Overlook at Great Notch, a 425,000-square-foot property at the nexus of Routes 46 and 3.

The building was about 61 percent vacant as of last month. But Mirliss said interest already has picked up, and he expects that to accelerate after the renovations.

E-mail to: joshb@njbiz.com
On Twitter: @joshburdnj

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