As PlanSmart NJ kicked off its “stranded assets” project last year, the group sought to create a playbook for towns that house one of the dreaded white elephants of commercial real estate.
Its findings could prove to be useful for more than just a handful of local officials: One in three municipalities in New Jersey — a state with 565 of them — has a stranded asset within its borders.
That’s just the start of what PlanSmart has found in the past year.
“The reason we launched the project was we were pretty sure it was more than just the ones that were hitting the headlines — the big ones: Bell Labs, Merck and (others),” said Ann Brady, executive director of the civic planning organization. “So we did think the numbers would be pretty dramatic, and I think our numbers support that it is a problem.”
PlanSmart’s findings on stranded assets — which include both large office and retail properties — will be unveiled this week at its 2016 Regional Planning Summit. In the process, the group will distribute its guidebook and deliver a message: the problem is widespread and still growing in the Garden State, but it represents an opportunity for local officials, planners and business leaders who can find common ground and intervene.
In analyzing the state’s network of commercial real estate, the organization defined “stranded assets” as office parks of 100,000 square feet or more that have had vacancy greater than 14 percent for at least five years. PlanSmart also included retail centers of at least 25,000 square feet that had vacancy greater than 20 percent.
All told, its researchers identified 339 stranded retail and office parks in New Jersey, representing about one out of every five. And the Trenton-based group said it is likely underreporting the scope of problem because, for instance, the data was collected last year and buildings that have been vacant for only four years at the time would not be included in the results.
“What it really shows is that there is a systemic problem and an ongoing problem,” said Sam Brookham, a planner with PlanSmart. “And it’s recent and increasing at the same time.”
Along with cataloging the large-scale vacancies — while emphasizing the job and property tax losses that come with them — the organization also hopes to advise local governments on how to go forward. For instance, Brady said, one of the report’s key takeaways is that zoning has to be changed on stranded asset sites.
“And as towns look at these sites and consider rezoning, they have to be flexible with their rezoning so that they don’t rezone in such a restrictive way that we’re creating stranded assets of the future,” she said. “And they should also look beyond the site and … figure out what changes needed to be made so that their entire community is better connected with the stranded assets.
“And they have to be looked at from a regional perspective.”
The report notes that local officials and community members often don’t see the demographic changes that affect the real estate sector. As such, developers are typically the ones that have initiated the handful of successful redevelopment projects in the state.
But that still requires a willing partner in a governing body, said Michael McGuinness, CEO of NAIOP’s New Jersey chapter. And the commercial development association has “started to identify those mayors that are stepping out and doing things that are bold,” he said, such as the mayors of Parsippany, Wayne and Bridgewater.
“They’re people that are educated, finally, to the issue,” said McGuinness, a member of the project’s steering committee, later adding: “So I think the more of those people that we can all identify and promote and give them a tabletop or a forum to talk about what they’re doing, the better. I think it will catch on over time, but it’s happening.”
As part of educating local officials, the report highlights two recent, highly touted success stories in the state: the repositioning of the former Bell Labs complex in Holmdel and the former Sanofi U.S. research campus in Bridgewater. At the latter, Advance Realty has attracted new tenants to the 1.2 million-square-foot campus by rebranding it as a life sciences hub, while securing the zoning changes needed to transform part of the site into a mixed-use, livable community.
Peter Cocoziello Jr., Advance’s director of business development, said one key for a developer is to create awareness within a town’s voter base. Many residents don’t understand that their own property taxes are used to offset the losses from a defunct office park that is collecting dust and no longer has a revenue stream.
“As people become more aware in their communities of these issues, they then go and talk to the elected officials and say, ‘This building — the lawn hasn’t been mowed. What are you doing about it?’” Cocoziello said. “And then it spurs a quick conversation, because all elected officials … want to do what’s best for their community, so the people in their community need to let them know what they want done and what agenda items they want pushed forward.”
“When you see that happening, like you do in a town like Bridgewater or some of these other towns, you really see a change that’s very different from the
The task of repositioning a stranded asset can help achieve other public policy goals such as increasing affordable housing, according to Brady and the PlanSmart report. And they noted properties with an abundance of surface parking may be candidates for “regreening,” or being converted to open space.
But all that starts with the type of major policy shifts needed to redevelop stranded assets. Near the top of the list is the ability to streamline the approval process and to plan regionally, both heavy lifts in a state whose municipalities savor home rule.
Investors Bank Senior Vice President Tim Touhey, who co-chairs the project’s steering committee, acknowledged the difficulty in achieving those objectives. But he said the need is clearer than ever, considering everything at stake.
“My hope is that they’re not threatened by the facts, and they look at it and suggest that maybe we have to look at regional structure and planning and local land use to figure out what entices investment within these municipalities,” Touhey said. “And in most cases, these are centers by design and development over time, so I’m hoping … that we have dialogue around this very important issue.”
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