About all that extra “office” space. It turns out, there’s a market. Just not necessarily for office workers.
A recent CBRE report said there is 8.6 million square feet of office space that is in the pipeline to be converted to industrial and residential, two asset classes that remain in top demand.
“Due to the dichotomy between the raging success of the industrial markets and the aging out of older office buildings, the New Jersey market is experiencing something it never saw before,” CBRE Senior Vice President Jon Meisel told ROI-NJ. “Millions of square feet of office space have been targeted for repurposing — primarily into industrial space. This is a real phenomenon that will lower vacancy rates that have been flat for decades. It’s ‘game on’!”
CBRE said owners of older, lesser office stock are finding new opportunities following the slowdown caused by the COVID-19 pandemic.
The report’s authors, Brian Kilmas and Nicole LaRusso, put it this way:
“A robust trend of office repurposing can potentially do for the suburban New Jersey office market what it did for Lower Manhattan after 9/11 and for Westchester County over the past 10 years, where significant office conversions helped reduce the vacancy rate and increase average asking rent in both markets,” they wrote.
“CBRE expects the flight to quality trend to continue in the New Jersey office market, leading more office owners with outdated office assets to pursue repurposing over the next few years.”
The firm breaks down the repurposing this way:
- 4 million square feet (51%) is set for residential;
- 3 million square feet (26%) is set for industrial;
- 340,000 square feet (4%) is set for mixed-use;
- Remaining 1.5 million square feet has not yet been determined.
CBRE officials said much of the repositioning is being done along the Routes 287/78 Interchange and the Suburban Essex/Eastern Morris submarkets, where relatively high per capita income and proximity to interstates makes the location highly desirable.
Notable projects include:
- Parsippany (Lanidex East), which has been approved for 600 hundred residential units;
- Somerset (400, 600 Atrium Drive), which will become distribution facilities (294,000 square feet and 132,000 square feet).
All told, here’s how the repurposing breaks down by submarket, according to CBRE:
- Route 287/78 Interchange: 1.8 million square feet;
- Suburban Essex/East Morris: 1.4 million square feet;
- Route 287/Piscataway, Brunswicks: 1.1 million square feet;
- Parsippany: 1.1 million square feet;
- Western I-80 corridor: 1 million square feet;
- Morristown: 920,000 square feet;
- Route 17 corridor: 700,000 square feet;
- Greater Monmouth County: 630,000 square feet.
