You may well have heard all about New Jersey's glut of vacant office parks and defunct corporate campuses, but here's another way to look at it:
For 94 of the largest buildings in northern New Jersey — those with more than 200,000 square feet — there is 14.5 million square feet of vacant space.
That’s equivalent to five Empire State Buildings.
It’s just one of the statistics that PlanSmart NJ, a planning advocacy organization, hopes will underscore a challenge that’s all too familiar in New Jersey: The state has a crisis of suburban “stranded assets” — or large, vacant commercial buildings that have become obsolete for today’s companies — creating a drain on local tax rolls and symbolizing the state’s economic troubles.
This time, however, the group hopes to frame the issue by quantifying the problem. That’s why PlanSmart has launched a major two-year research project that will compile data on vacancy, demographics, property tax appeals and other metrics related to the sites, with the aim of creating a guidebook for local officials and sparking a policy change that could help them find new life as mixed-use assets.
“We’re looking at it holistically — that this is an economic development project, it’s an environmental protection project, it’s a resource efficiency project,” said Ann Brady, PlanSmart NJ’s executive director. “We think there’s a lot of opportunity with these sites, to better connect them to the greater community, to use the infrastructure that’s already there, so we’re directing growth to areas where there’s already existing infrastructure.”
The effort has broad support from the real estate community, from commercial developers to mixed-use and residential builders who are experienced in repurposing old sites. And the groups have come together around the notion that New Jersey’s glut of unused commercial space can be leveraged to meet a gross undersupply of housing.
“The solution to me appears to be relatively obvious,” said George Vallone, president of the New Jersey Builders Association and a member of the project’s steering committee. “It’s the tactics that are always the tough part. And that’s where I hope we end up with what I look at as a kind of toolkit that we’re going to be able to put in front of municipalities in terms of how to repurpose these commercial assets and to bring this imbalance back into equilibrium.”
That’s not to say stakeholders haven’t tried to tackle the problem before, whether it’s at the state government level or by development and planning groups. And such efforts could still be met with skepticism by local governments, many of which have spent years resisting mixed-use projects amid fears of taxing their school systems and municipal services.
But Vallone, president of Hoboken Brownstone Co., said that “here I think the wind is at our back because the economic indicators are on the wall now.” Dormant commercial properties have turned into property tax appeal cases, he said, and he believes local residents are becoming more open to redevelopment as the tax burden shifts in their direction.
What’s more, experts say the state is approaching a surge in unmet housing demand from millennials, who have put off housing decisions amid uncertainty about the job market and high student debt. But in just a few years, Vallone said, that age group will be far enough removed from the recession and will have paid off enough of its debt to start to qualify for mortgages.
Housing market expert Jeffrey G. Otteau expects the surge to come in two waves, starting with millennials who currently rent and will look to transition to owning. He projects that group to buy about 175,000 homes over the next five years, followed by a wave of millennials who still live with their parents and will look to enter the apartment market over the ensuing decade.
But that first group could be faced with a lack of supply, Otteau said, because those millennials won’t be able to afford the existing homes on market or those that will be vacated by older residents who are downsizing. He said most millennials are looking for small-lot, single-family homes or attached homes, “which most municipalities have precluded through their land use ordinances.”
“Most municipalities in New Jersey require an acre or more to build a single-family home,” said Otteau, president of Otteau Valuation Group in East Brunswick. “So there is this large void in the market of not enough affordably priced small-lot, single-family homes and townhouses for millennials to buy, just as this demand is going to be coming online.”
Members of the PlanSmart project’s steering committee say it’s also a question of job creation. Peter Cocoziello Jr., director of business development for Advance Realty, said companies are looking to cluster in dynamic, mixed-use settings, but those locations are scarce in New Jersey.
But the state’s stranded assets offer the opportunity to create them. For instance, Advance Realty plans to reposition the 110-acre former Sanofi U.S. research campus in Bridgewater, through a proposed mix of residential units, a hotel, retailers and other uses to complement much of the existing office and lab space there.
“To be on some of these larger sites and incorporate (a mix of uses) — and create a life out of something that was previously gated and secluded — really drives home the point of attracting the business there,” Cocoziello said. “And then the people follow very quickly. That all can happen very fast because a lot of the infrastructure is already there.”
The stranded assets project is already underway but will be formally launched Friday at PlanSmart’s Regional Planning Summit in Trenton. The organization’s research so far has looked at buildings with at least 200,000 square feet, covering an area that extends through Mercer, Monmouth and Ocean counties.
The group is optimistic about its prospects, not only because of economics, but because it believes the process will appeal to many types of stakeholders. For instance, Vallone said development projects typically foster tension with environmentalists, but he feels this effort will be different because it focuses on redeveloping and reusing existing assets.
“(That’s) where the environmentalists and the development community come together,” he said.
Brady also conceded that “sometimes local officials are a little bit skeptical of developers,” but she noted that the mandate of her Trenton-based group goes well beyond development. And she cited the involvement of leading municipal officials such as Hope Township Mayor Tim McDonough, a past president of the New Jersey League of Municipalities, who is co-chairing the stranded assets project steering committee.
And committee members pointed to one other important factor — that stranded assets have “stranded capacity.” Michael McGuinness, CEO of the commercial development association NAIOP’s New Jersey chapter, said that includes vacant school seats, and he believes reality will set in for towns that have avoided mixed-use and residential development because of fears about new schoolchildren coming in.
“If you have a town that has a lot of vacancy in it, take a look at the demographics for those younger grades — kindergarten, first, second and third grade: It’s a fraction of what it is in the upper grades,” McGuinness said. “So those towns that have been shunning schoolkids for years should wake up and realize that they have a lot of vacant pupil stations in their towns.”
With the project ready now moving forward, Vallone said Friday’s summit will be “the beginning of the next step.”
“We’ve got a lot of great information now,” he said. “We think we’ve got the problem properly framed in terms of the scope of it and now we’re moving out to basically raise awareness levels, begin this visioning process, begin exploring options and ending up with recommendations.”
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