Quarter of offices in NJ are empty
Work-from-home numbers stable since fall 2022
By: Michael L. diamond
NorthJersey.com
USA Today Network - New Jersey
..... When Commvault announced it would sell its sparking headquarters in February 2023 for some $40 million to Ashing Development LLC and lease back 10% of he space for its own employees, it heralded a new era in remote work.
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The technology company's plan, though, ran into a snag. Employers were adopting work-from-home polices and retreating form offices so quickly that Ashing couldn't convince lender to finance the sale. Eighteen months later, Commvault still owns the building.
..... "I don't think it;s news that the financing market for offices has completely dried up since COVID," said Gary Fox, an Eatontown-based attorney representing Ashling. "We've got a lot of dark office space throughout the region, throughout the country, the world."
..... New Jersey's office market continues to falter, pushing availability rates to new heights companies that once took up hundreds of thousands of square feet are downsizing. employers that want workers in person are revamping their spaces to make them cool. And some office owners have given up and decided to seas for a new use.
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Real estate experts said the office market has slogged through tough times before - the recessions in the early 1980s and 1990s; spot 9/11; the collapse of the housing bubble in 2008 - but it recovered. This time? employers appear to have settled on anew model that doesn't require their workers to be on site five days a week.
..... The second quarter of 2024 "was abysmal in the life of commercial real estate," said Jon Meisel, senior vice president a CBRE in East Brunswick. "From our respective in the past year, [2023] 18 months , not enough employees are coming back into the office.
..... Commvault's holding pattern is part of a bigger trend. The share of employees who have remote-capable jobs but are working exclusively on site plummeted from 60% in January 2019 to 21 % in May 2024, while the share of employees working just part-time on site rose from 32% to 54%, according to a Gallop poll.
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Those figures have remained steady since September 2022, a sign that employers are settling on a hybrid model that requires works to come to the office just a couple of times a week.
..... It has left New Jersey's office market stagnate. A recent CBRE report found:
* Available space. Despite relatively strong job growth, employers in the second quarter continued to downsize physically, pushing the availability rate to 24.9%, up from 24.5% the previous quarter and near the all-time high of 25% set in the third and fourth quarters of last year.
* Less inventory. Agents have plenty of available space, even though 17.3 million square feet of office space - about 10% of the total - has been converted to other uses or demolished since 2019, CBRE said. that figure would be higher, it noted, except for increasing instances of opposition to reuse projects.
* Subleasing. companies with longterm lease are shrinking their footprint and searching for replacement to take over their space. Some 19% of the available space is from employers trying to sublease their space.
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Meisel said the fanciest office buildings, known as Class A, are performing better than the rest of the industry as employers offer their workers more goodies to convince them to spend more time on site.
..... Nokia Bell Labs, for example, said it would leave its legendary Murry Hill campus and relocate to a 35,000-square-foot building that is part of the helix project across the street from the transit station in New Brunswick.
..... It will join big New Jersey employers such as RWBarnabas Health and Hackensack Meridian Health to create what developers say will be an innovation hub.
..... Other companies are adapting to the new hybrid work model. New Jersey Resources recently redesigned its 40-yearold, 157,500-square-foot headquarters in Wall to accommodate employees who can apply for flexible arrangements.
..... The renovation includes hoteling space, where employees can reserve desks, and meeting rooms that have display monitor and videoconferencing equipment, spokesman Michael Kinney said.
..... "It's working," Kinney said in an email. "the office is an active, energetic space, where our employees enjoy coming together to collaborate. along with the technology to engage and interact with remote team members."
..... Real estate agents are seeing more Demand from businesses that depend on in-person connection health care, education, gyms and restaurants. But larger companies that traditionally filled out offices "are generally downsizing to smaller spaces," said Doug Twyman, senior managing director for Collier International.
..... Commvault finds itself in the awkward position of being both a real estate owner and a high-tech tenant.
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The company opened its 278,000-square-foot, four-story building in 2015, brining a Silicon valley vibe to what was then blonde-and-out Fort Monmouth. The building featured a slide, a football table, a fitness center and an outdoor walking trail.
..... When COVID-19 hit, the company's employees retreated to their homes and plugged into work through their laptops and smartphones. The arrangement worked so well that the company continued its remote-work policy and decided to sale the building.
..... It announced in February 2023 that it had found a buyer. Ashling Development, and expected the deal to close that year. But Ashling couldn't line up financing, and the two sides wound up in court, battling over whether Commvault is entitled to a $1.3 million deposit that Ashling made and was held in escrow, according to court documents.
..... The case is ongoing.