Planners struggle to find uses for office complexes

Merck & Co. will soon vacate its global headquarters in Whitehouse Station, Hunterdon County, which employs 2,100 people.
Merck & Co. will soon vacate its global headquarters in Whitehouse Station, Hunterdon County, which employs 2,100 people.
Posted: July 15, 2013

In gritty urban centers such as Hoboken, Jersey City, and Philadelphia, manufacturing's decline left behind carcasses of abandoned factories in the 1960s and 1970s.

In some neighborhoods, those same battered bastions of industry have been reborn as chic lofts for latte-drinking millennials or charmingly reconfigured as offices with open floor plans and coffee bars.

These days, there's another type of building carcass worrying urban planners, government officials, and developers.

What, they ask, will happen to the parking-lot-ringed, atrium-lobbied suburban office complexes now emptying due to technology, outsourcing, the recession, and the changing preferences of the younger workforce?

That's Michael Sullivan's headache in Readington Township, population 16,126, in rural Hunterdon County, N.J.

As the township's planning consultant, he'll be charged with figuring out what to do about the soon-to-be-vacant, hexagon-shaped behemoth that houses the global headquarters of Merck & Co. and the 2,100 people who work there.

"From a land-use policy perspective, it is a significant matter to address," he said. "At 900,000 square feet, it's enormous."

By mid-2015, the building will be empty, part of the company's plan to move to Summit, N.J., "adjacent to major transportation hubs and desirable urban centers," as it said in announcing the news.

"I don't know too many businesses looking for close to a million square feet of office space," Sullivan said. "And the office market in New Jersey has been depressed for years."

The former Bell Labs and Alcatel-Lucent site on 472 acres in Holmdel Township, Monmouth County, and the Sanofi U.S. research campus in Somerset County on 110 acres - these are among the largest in flux, but there are many others, particularly in Central and Northern New Jersey.

"There is simply too much old, obsolete office inventory," James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy, told planners, developers, and municipal officials gathered at Rutgers University on Friday for a conference sponsored by the Educational Foundation of the New Jersey League of Municipalities.

The conference was titled "Reinventing New Jersey's Obsolete Suburban Office Campus - Local and Statewide Impacts."

It was Hughes' job to explain how New Jersey, once renowned for its glistening office buildings strung like pearls along the state's highways, is now struggling with persistently high office vacancies.

"There is strong interest on the part of the investment community in how these buildings can be transferred," said former New Jersey Commerce Secretary Gil Medina, a former Camden City Council member who is now executive vice president of CBRE Brokerage Services in Saddle Brook.

"They may look like stranded assets, but they can also be viewed as an opportunity," he said.

The story of New Jersey's office development includes a "huge 1980s office-building boom," Hughes said. "It was bicoastal, and New Jersey was one of its epicenters."

Just as factories left New York for New Jersey, where there was cheaper land, office operations moved from pricey Manhattan to New Jersey. There, they found enough space for rows of cubicle-contained office workers performing pre-Internet functions - filing and keypunching, for example.

"We'd plant a building in a sea of asphalt and chain [workers] to their desks," Hughes said.

Technology drove changes. "The IBM personal computer didn't emerge until 1981," he said. As computing advanced, buildings had to be retrofitted to wire networks.

"As we got into the 2000s, the Internet facilitated outsourcing," he said. Office operations jobs either were transferred to other countries, where costs were lower, or were eliminated by technology.

"In 2007," Hughes said, "after we finished upgrading all those buildings, all of a sudden we became mobile. We didn't have to be attached by an umbilical cord to the office.

"All of a sudden, you don't need so much office space. We haven't seen the end of that trend."

Meanwhile, he said, the newest group of workers, born from 1977 to 1995 - sometimes called millennials - "are a different generation. They don't want to be isolated in a cubicle. They don't want to live in plain vanilla suburbs. They do not find one-dimensional office buildings very attractive."

And, Hughes said, they don't like to drive. An increasing number don't have driver's licenses.

"That's downright un-American - and un-New Jersey," he said. They prefer a bicycle, bus, or train.

Then, "the recession accelerated the restructuring that was taking place anyway," Hughes said. Businesses closed offices, vacancies skyrocketed, and prices per square foot dropped.

To the developers on the speakers' panel, the falling prices also provided potential opportunity for innovation, lowering acquisition costs, and leaving more money for retrofitting.

To replace the monolithic office, developers generally imagined a mix of office, retailing, and housing.

"The idea is to create an urban hub in the suburbs," said Ralph Zucker, president of Somerset Development, the Lakewood company developing the Lucent site in Holmdel.

Even though South Jersey, like the rest of the state, has been affected by technology, generational changes, and the recession, it has fewer large office complexes occupied by a single company - sparing it, mostly, from the challenges facing Sullivan as he copes with Merck's planned departure in Whitehouse Station.

"Most of the office buildings are not special-purpose," said real estate specialist Jason Wolf, principal of WCRE L.L.C. (Wolf Commercial Real Estate) in Voorhees.

"We have mortgage businesses, and during the recession that got hit really hard," he said.

Developers are considering turning vacant offices into residential space at the Main Street Voorhees complex, he said.

An 81,500-square-foot Lockheed Martin building on Route 70 in Cherry Hill became vacant recently, he said, the result of consolidation and contraction in government spending. But its location has made it attractive to potential tenants.

Cherry Hill is now facing a battle with Philadelphia to retain Subaru of America's headquarters. The expanding company is searching for 250,000 square feet and will leave its current property when it finds it.

Wolf said the developer of the new property will likely have to include dealing with Subaru's current headquarters on Route 70.

In Readington, Sullivan said, officials are just beginning to think about how to approach Merck's coming departure.

Maybe, he mused, housing would work, but he thinks the floors are too wide, with too much space between the windows. And would mixed use increase demand for schools and municipal services?

"Can you retrofit it and make it work?" he said. "It's no easy task."


Contact Jane Von Bergen at jvonbergen@phillynews.com, @JaneVonBergen on Twitter, or at 215-854-2769. Read her workplace blog at www.philly.com/jobbing.

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