Adaptive Reuse: A Solution for a Suburban Office Market in a State of Flux3.4.2016
By Stephen Cassidy, President
The suburban office market as it exists in New Jersey today is largely in a state of flux, created in no small part by the cultural and economic demands of the baby boomer generation, which came of age in the 60s and 70s and migrated in large numbers to the suburbs in the 80s and 90s. In fact, it’s been estimated that two-thirds of the Garden State’s office properties were constructed during that period.
But yesterday’s state-of-the-art product, 30 to 40 years later, is often obsolete, the result of technological advances, changing cultural demands, and other market forces. Today’s Gen-Xers and millennials are more urban-centric, choosing to live in cities or suburbs that are easily accessible to large cities, rather than more distant suburbs. As a result, while New Jersey’s urban office markets are thriving its suburban markets are bogged down with high vacancy rates and falling property values.
For entrepreneurial developers and owners with vision, skill and expertise, these antiquated properties provide an enormous opportunity to repurpose and rehab existing building stock into better, more contemporary uses. Obviously, adaptive reuse of an obsolete suburban office building is not always a “slam-dunk.” The process begins with careful analysis of the property–location, surrounding demographic, accessibility, condition of the property and more. It’s the role of an experienced, integrated real estate company to ask the right questions and ultimately provide maximum returns on an adaptive reuse.
What use would work best for the property? Perhaps, retail? That depends on the surrounding consumer demographic, existing competition, highway access, ability of the location to attract strong, well-known retailers.
What about Medical? Parking ratio clearly comes into play, as does the ability to adapt the existing building to the high level of technology that medical use requires. Would that process be cost-prohibitive?
Should it be converted to residential? While younger generations are more urban-centric, is there enough residential demand in the particular market to justify adaptive reuse as residential? Do the market’s current vacancy rates and availability justify residential development? What would be the cost of adapting an office building for residential use—or would the building have to be razed to pave the way for new construction?
The picture is further clouded by the fact that certain obsolete properties are also victims of neglect by ownership entities lacking the vision to effectively create value as the market has evolved. However, for an entrepreneurial real estate company with vision, that scenario provides the opportunity to acquire an undervalued property, ask all the right questions, complete a thorough analysis, and ultimately make the right decision about the property’s future use. The current suburban office market is clearly primed for rebirth, providing many opportunities for savvy, visionary owners like Denholtz Associates.