By David DeMatteis
Senior Director, Brokerage
It’s no secret that the New Jersey Suburban office market has endured a difficult run. While there are many contributing factors to this, a significant one has been the growth of the millennial generation into the largest cohort in the workforce today. As this generation has grown up they have flocked to urban settings. It is this generation that has given rise to the trendy “live/work/play” urban dynamic, with the preference for access to public transit, proximity to the workplace, and a cultural and social life embedded directly within their local community.
These trends have been a great boon for cities across the United States, but suburban areas like those throughout New Jersey have suffered to some extent. Skilled workers are in great demand in today’s job market, putting the worker in a position of power, and so companies go where the talent is rather than expecting the talent to come to them. This has led to decreased urban office vacancy rates and increased suburban rates.
As a result, the office product in many areas in New Jersey has grown tired and outdated. Legacy Owners had been hesitant to invest in upgrades if there was little hope that these investments would lead to higher occupancy.
The tide is finally beginning to change, however, and there is hope on the horizon for the New Jersey office market. The same factors that contributed to the decline of the office market are now poised to turn it around. Once again, it comes back to millennials. As a cohort, not only do they comprise the largest segment of the workforce, but they are aging, now beginning to get married, have children, raise families. This introduces new dynamics to their life preferences. Raising a family in New York, for instances, is expensive and at times impractical. Owning a vehicle is almost a necessity with kids – it’s not easy to load a car seat into an Uber. Car ownership in the city is both expensive and inconvenient. Growing families require larger residential spaces, which prices many right out of the city. And the public schools in New York too often leave much to be desired.
The residential market is already on its way back, and office is beginning to follow suit. Bergen County in many ways serves as the model for how to capitalize on the shifting dynamics of the millennial generation. Many of the towns in the county have well-developed Main Streets, with amenities that mirror those in the urban neighborhoods the city dwellers desire – local coffee shops, public transit, proximity to New York, walkability, etc., while remaining affordable and at-tractive for raising a family.
This is leading to a demand for office product, but for a successful leasing strategy landlords must make sure that the assets are attractive. Companies like Onyx Equities and Capstone Realty Group are buying up signature assets/portfolios and investing in exciting improvements and amenities that are needed to draw the urban migrants. Cafés, fitness centers, repurposing of lobby waiting areas into touch down workspaces. The new investors are injecting urban amenities into suburban product.
Landlords and occupiers alike need to be smart about the way they approach their real estate strategies right now in New Jersey. The opportunity today is greater than it has been in a long time. Landlords who invest in the appropriate renovations and amenities will attract high quality tenants and see their vacancy rates drop and their rents rise. Companies who want to attract the top talent will ensure that their workspaces are modernized in ways that speak to the growing pool of skilled workers.
This is certainly a hopeful time for New Jersey office developers, landlords, and brokers, more so than in a long time. So long as developers and investors keep sight of what drives this opportunity, New Jersey’s office market could be positioned for a strong and enduring successful run.
To learn more about Cushman & Wakefield’s presence in New Jersey and throughout the New York Tri-State Region, visit us at here.
David DeMatteis is a Senior Director with Cushman & Wakefield for over 16 years. With an architectural degree from Columbia University, David applies his skillset to assist building owners to position their assets as best in market. He has an expertise in the Hudson Waterfront and Meadowlands markets with over 2.5 million SF between the two counties. David also advises several tenants, specializing in multi market mid-cap corporate accounts.