It was 2013 when Fox Rothschild ramped up its search for new office space in northern New Jersey, with an eye toward the future and its ability to compete for talented young attorneys.
Leaders of the firm set their sights on Morristown, a place its real estate team knew all too well.
“When we look at younger associates, young partners, everybody now wants to be more downtown, as opposed to in suburbia,” said Robert Klausner, a real estate attorney and partner with the firm. “(Our) clients are building a lot of residential in transit hubs — it just seems like everybody wants to be where there are bars, where there are trains, where there is housing.
“It convinced us that this was the right place,” he added. “But there was a problem — there’s not much office stock.”
Fox Rothschild addressed that issue by recruiting one of its own clients, The Hampshire Cos., to redevelop a triangular block between Market and Bank streets..
The 42,000-square-foot building, which is now under construction, will transform what was a row of tired, faded commercial structures and bring downtown Morristown its first new office property in years.
Problem solved for the law firm, which plans to occupy the space by early next year. But for Morristown, the project only highlights a larger issue: For a place that has become a magnet for new residential development — and a retail and restaurant destination — experts point to a glaring lack of modern, Class A office space in downtown Morristown.
And while other transit hubs in New Jersey have seen new office development in recent years, the supply in Morristown has all but stayed the same. That is despite what experts say would be an overwhelming demand from office tenants seeking a walkable, downtown environment for its employees.
Morristown’s a magnet
If you ask Robert Klausner, Morristown has more than enough to win over anyone who’s not familiar with it as an office destination.
But he was happy to have a little help from Mother Nature in 2013, when he was touring the downtown with the leadership of Fox Rothschild.
“It helped that it was a beautiful sunny day,” said Klausner a partner with the firm. “They fell in love with Morristown. They understood what the drawing power of Morristown could be, so they approved it.”
It was part of the process that led to the construction now underway at Market and Bank streets, the future of home Fox Rothschild’s northern New Jersey office. The five-story, triangle-shaped building, which is being developed by The Hampshire Cos., is slated to open around February and house about 52 lawyers.
But it also gives Fox Rothschild room to grow, with plans calling for offices for about 70 partners. With its location in downtown Morristown, which Klausner believes is a key draw for young attorneys, he expects that those offices will be filled sooner rather than later.
“I think that there’s a good chance that, within two years, the building will be too small if we grow like we really want to or really can,” Klausner said. “So we’re going to have to be selective in who we bring in, but I’m bullish on it.”
“The product here generally is older vintage, but despite that, it leases,” said Jeffrey Heller, an Avison Young principal and managing director based in the firm’s Morristown office. “So if you built a first-generation building, I think it would have a ton of appeal.”
According to data compiled by Avison Young, only two of 13 existing office buildings in downtown Morristown are less than 90 percent leased. Within that group, only one was built after 1987, while just two others have undergone renovations since that time.
Observers say it’s not for a lack of trying, but point to barriers in the town such as strict design and size limitations that are meant to preserve Morristown’s historic character. Other issues include the lack of developable sites, as builders continue to ride the wave of residential construction in the town, along with the parking needs of office space.
“I think it’s important for a lot of companies to want to be in exciting downtown environments like Morristown,” said Eugene Diaz, principal of Prism Capital Partners. “But people look at land or buildings and they say, ‘Well, multifamily is much more valuable and much more financeable,’ so a lot of these sites don’t get built with commercial space.”
But Diaz said the interest from office tenants is tough to ignore, noting that “there’s outstanding demand … (from those) willing to pay for extremely high quality space in an outstanding downtown location like Morristown.” It’s why the Bloomfield-based firm is undertaking a somewhat complex project to rehabilitate and expand a building at 21 South St., which houses a Wells Fargo bank branch on the ground floor and three floors of office space above.
Diaz said the project will deliver about 54,000 of new Class A space to the downtown, including the renovated space and the construction of two new stories atop the building. Prism plans to submit its plans to the municipality in the coming months, he said, with hopes of being under construction sometime next year.
But further office development will be complicated by an issue that’s well known in downtown Morristown — parking. Phil Abramson, Morristown’s planning consultant, said new construction in a dense setting would typically need structured parking — a costly proposition that then requires a larger project in order to make it worthwhile for the developer.
That only problem? Larger projects mean additional building height — the type of thing that could meet resistance in a town that prefers consistency in its architecture.
It’s why Abramson, a principal with Topology LLC, said “the opportunities that are most ripe from an economic feasibility standpoint are ones where you can leverage existing parking assets.” That’s part of the strategy for the new Fox Rothschild project, whose tenants will use two nearby decks when the building opens.
“In some ways, office is a great complement to many of the uses in Morristown that are a very nighttime-oriented — entertainment, dining, residential,” Abramson said. “It’s just finding that sweet spot where you have an existing parking facility that’s primarily used in the evening.
“That’s the real low-hanging fruit for new office development if you could find a scenario like that, and there’s not many.”
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