New Jersey's Big Reinvention
Holmdel mayor Eric Hinds was playing a foursome when an older gentleman started talking to him about the empty building that once housed Bell Labs, then the largest vacant piece of commercial property in the US. The man was excited about an idea he had for the property. “He told me I was going to make money and it would be difficult politically, but it would be fantastic,” he recalls.
What did the man want to build? A jailhouse, the mayor (pictured above at a Bisnow event last year) told the audience at our recent Reinventing New Jersey event at Bell Works in Holmdel. “I was excited and he gave me a jail?”
The reinvention of the 2M SF Bell Labs into today’s Bell Works was an unbelievable process, he says, and he tried not to get excited too early, “because we all know what can happen.” But over the past six years, watching what Somerset Development did to the property is something that will be talked about for a long time—especially since Holmdel had been in a perfect situation for 30 years, with Bell Labs employing 6,000 people (in a town that only had 6,000 people) and paying 25% of its bank roll.
But eventually Bell Labs became obsolete, fading into the ‘90s. “The town didn’t adjust quickly enough, and Bell Labs didn’t adjust quickly enough. We were left with a white elephant,” he says. As the tax base decreased, taxes rose and residents were unhappy.
Somerset president Ralph Zucker became the white knight and said he would attract business back to Holmdel. He said it wouldn’t be a single user, but instead wanted the town to consider the Bell Labs building an Empire State Building on its side. “We bought on to this little by little,” the mayor adds. “It wasn’t going to be the same environment as Bell Labs.”
The entire project took creativity, he adds. “Having vision is one thing, but having guts is another. A lot of people had great ideas and kept investing in the building. ‘Build it and they would come’ then came to fruition.”
“We don’t have to reinvent New Jersey…I think we have to reposition New Jersey,” says HFF senior managing director Jose Cruz, who kicked off the reinvention panel moderated by Partner Engineering & Science discipline leader Adam Alexander.
He points out NJ’s best attributes, including a strong, educated workforce and its proximity to New York and Philly. The state is still seeing great capital markets activity, he says, with a record pace of potential transactions this year—and is already ahead of last year's volume. Cap rates are solid, and plenty of capital wants to be here, including foreign and from other states.
NJ Economic Development Authority president Timothy Lizura reports he just approved two new Grow NJ incentive packages for Bell Works—a 300k SF lease for iCIMS, which could bring 700 jobs, and Manhattan Telecom, moving from its namesake borough and expanding. The Grow NJ program has approved 175 projects over the past two years. “If we’re doing our job, we’re making a meaningful distinction in their decision to relocate or move to New Jersey. And there are a lot of projects and leases that are happening without incentives, because they don’t need them.”
Another positive attribute for the state: It understands what it needs to get business done, says O’Neill Properties Group founder Brian O’Neill, whose firm is building The Pointe, a mega-retail destination in Sayreville on a former brownfield site that needed complete cooperation from the township, the Department of Environmental Protection and the NJEDA. “Redevelopment and revitalization starts with an awareness of the market reality,” he says. “If you can start there and buy into what needs to be accomplished, then I think you can put the packages in place to actually accomplish it.”
Ralph says he views Somerset's work of repositioning tired assets as a return to common sense. He recalls that when he first saw the Bell Labs property, it was a “tired place with vines growing through it” and lined with cubicles. “I’m not shocked someone recommended a prison, but the bones and incredible, simple streetscape was obvious,” he notes. “It’s about peeling away the layers and getting back to basics…Bell Works is evolving in front of our very eyes.”
The company did have a hard time at first, he concedes, and the first lease was for only 1,200 SF. However, it has since been discovered by the tech and telecom worlds. “We’re excited to have been validated,” he says.
The design panel, moderated by Bohler Engineering senior project manager Dave Wisotsky, was kicked off by Alexander Gorlin Architects principal Alexander Gorlin, who's involved in Bell Works’ redesign (above). The building has been “a really amazing challenge,” he says, given it was originally unsuitable for today’s uses. One of the biggest challenges: bringing more light into the office space while keeping original starchitect Eero Saarinen’s design intent.
Mancini Duffy president Christian Giordano, who’s also involved in Bell Works, says the space was opposite the way today’s office space works. If it were a smaller building, it would be easy to whitebox, but that can’t be done with 2M SF. It ultimately becomes tenant driven, and tenant by tenant, Bell Works is moving along.
Brian Whitmer, a senior director with Cushman & Wakefield’s capital markets group, says the market is at the cusp of seeing creative office space beginning to play out and see success, like Bell Works. He's involved with another reinvented office building in Downtown Ridgewood, and investor interest has been overwhelming. People want to own long term, he says, and these buildings have competitive advantages the older stock does not.
Hugo Neu CFO Steve Nislick shared another successful adaptive reuse project—its 2.4M SF Kearny Point Industrial Park in South Kearny. The project is in 130 acres of former shipyard and scrap metal facilities. Hugo Neu decided to reuse the buildings and divide them into flex space that offered great ceiling heights, floor plates, and new elevators and HVAC. Over the past six months, it’s rented out 50k SF to 42 separate tenants; 20% are from New York while the rest have relocated from other parts of New Jersey. It also just opened up co-working space on the property and signed 20 desks in two weeks.
Kieran Flanagan, president and co-founder of Hollister Construction Services, says adaptive reuse is something you have to do here. New Jersey's not making any more land, and many old buildings have great infrastructure that can be reused well. For instance, his firm renovated Bayer’s former corporate HQ into space for Driscoll Foods by tearing down half of the office space and attaching a 350k SF refrigerated warehouse. In Hackensack, it’s gutting the old bank building at 210 Main and turning it into 90 new apartments, adding a penthouse floor and attaching it to 214 Main, an office-to-residential conversion with 30 apartments.
The technology panel featured Alpha Venture Partners co-founder Brian Smiga, BrandProject partner Jay Bhatti, Susquehanna Growth Equity managing director Scott Feldman, Onyx Equities managing principal Jonathan Schultz and WorkWave CEO Chris Sullens.
Among New Jersey’s strengths, according to the panelists: the lifestyle has a lot to offer, with access not only to Philly and NYC, but the ocean, mountains and four seasons—which a lot of places don’t have. With 9 million people in 9,000 square miles, it’s the most densely populated state with a talented, well-educated residential base. It’s a mecca that allows easy access to get to people, do business and form relationships, and while there haven't been many cool places to work in, that’s changing, which will attract more startups.
Its biggest challenge: the perception of New Jersey outside of the state. Tech folks think they have to go to Boston, the West Coast or New York City, although New Jersey has the same opportunities and cutting-edge companies. People aren’t going to come unless they see something vibrant, and the state needs companies that will take risk and understand the generational shift is real. There are also challenges with town approval processes, which is harder that it should be. New Jersey has a bureaucracy and taxes are three times that of Pennsylvania and twice that of Connecticut, leaving too many hoops and hurdles to get things done.
New Jersey is a land of contradictions, noted Madison Marquette senior managing director Gary Mottola in his closing keynote. The state had been developed through the sprawl of the ‘50s and ‘60s, making it a “not very pretty state,” but on the flip side, “We have 120 miles of the most spectacular coast line you can imagine and 40 communities that are all different.”
Then there are the Jersey jokes, which he says are sponsored either by arrogant New Yorkers or uneducated out-of-staters whose only experience was driving up the Turnpike past the refineries. But he was quick to point out the number of famous people who hail from the Garden State, including Thomas Edison, Albert Einstein, Bruce Springstreen, Meryl Streep and Jack Nicholson.
As highlighted by the previous panels, the state is full of challenges and opportunities. But two things NJ has are edginess and attitude. “Everyone knows that,” he says. “And that attitude, on one hand, is repelling, but on the other hand brings respect and makes people think of us."
"As a state, we need to brand ourselves and recognize they know the edge and attitude, and make it a positive, not a negative. We want to be considered in the same breath as Brooklyn and LoDo and Austin and Portland and Seattle. We have that chance because we do provide an experience for people…New Jersey needs to be the Brooklyn of this country.”