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Strength In Numbers: New Jersey Office And Retail Work Better Together

Industrial real estate remains king in New Jersey, and multifamily is still strong (especially near New York), but for industries that cannot trade as much on proximity to New York and/or Philadelphia, the state has work to do.

North American Properties partner Mark Toro

Aside from apartment buildings in suburbs that easily connect to New York, multifamily, office and retail ideally work in concert to create live-work-play environments that add to the appeal and value of every building in the area. It has become the most popular form of development since the recession — a trend that has left much of New Jersey in the dust.

“New Jersey’s core advantage in the 20th century — a suburban-dominated, automobile-dependent lifestyle — is now regarded as a disadvantage,” North American Properties partner Mark Toro said in his keynote address at Bisnow’s New Jersey State of the Market event. “[Live-work-play] is the business we all need to be in today.”

If no one who lives in a town works there as well, then there is no daytime activity, which severely restricts the amount and the types of retail that can be built. As shopping centers, for so long the lifeblood of New Jersey retail, steadily lose popularity, New Jersey is particularly vulnerable to what some have taken to calling the “retail apocalypse.”

Yet those who use such ominous terms are often referring to or associated with soft goods retailers, the ones most directly hit by the e-commerce revolution. For many landlords, the current moment is not so much an apocalypse as a sea change, according to Ripco Real Estate Vice President Alison Horbach.

“While a lot of national retailers are sitting back and figuring out how to deal with e-commerce, I think we underestimate the amount of independent and regional players that are expanding,” Horbach said. “Some of them are startups, but some of them are very well-funded that come out of Wall Street.”

Lotus Equity Group Chief Financial Officer Kevin Collins, Vision Real Estate Partners Managing Partner Ross Chomik, Somerset Development President Ralph Zucker, Ripco Real Estate Vice President Alison Horbach, SJP Properties Senior Vice President Peter Bronsnick and Cole Schotz P.C. Member Gary Albrecht

Anyone who pays attention is well aware of the emphasis retail places on experience these days, and Horbach singled out certain types of experiential retail that have been expanding recently.

Besides urgent care centers and similar forms of retail-style healthcare, the common thread seems to be the classing up (and boozing up) of traditional family entertainment spots: upscale bowling alleys with bars, eat-and-drink movie theaters and boozy arcades such as national chain Dave & Buster’s or Brooklyn-based Barcade, which now has locations in Newark and Jersey City.

“These tenants are doing deals and are great operators,” Horbach said. “So it just takes looking outside of the box to see what uses are successful. The pool of retailers has shrunk, but there has been growth with the different concepts that are expanding.”

Dave & Buster’s, movie theaters and bowling alleys can help landlords backfill spaces abandoned by big-box retailers, while some may simply want to demolish their former Toys R Us locations and build an apartment building for a (relatively) quick way to create a mixed-use community. But in order to achieve a live-work-play environment, the “work” is still missing.

Just like shopping centers, modern planning trends seem to have relegated suburban office parks to also-ran status. But mixing the two together could solve the problems of each, as Somerset Development found with its redevelopment of Bell Labs in Holmdel into the retail, office and hotel mixed-use Bell Works.

“Great suburban markets have a lot of people, a lot of capital, great vehicular access, and a dearth or a yearning for a particular place to be,” Somerset President Ralph Zucker said. “Once you do that, you become the magnet for everything around.”

HFF Managing Director Kevin O'Hearn, The KABR Group Managing Member Adam Altman, Woodmont Properties CEO Eric Witmondt and Cushman & Wakefield Vice Chair Stan Danzig

Larger cities like Jersey City and Newark have built impressive multifamily towers in the last few years — and had no trouble filling them, according to HFF Managing Director Kevin O’Hearn — but such activity can largely be chalked up to proximity to New York, and the retail market suffers as a result. Once again, the question becomes how to make the streets active during the daytime.

“We need to look at some of the few sites we have left [in Newark and Jersey City] and start to look at how to attract office users to these locations to make the retail scene make sense, and not have stores turn over every six months,” SJP Properties Senior Vice President Peter Bronsnick said.

The most efficient way to pair retail with office is simply to ask your office tenant what they would like to work above, according to Bronsnick. While the multifamily density has driven “incredibly hot” demand in Jersey City, it will not be sustainable without office users, Bronsnick said.

“I almost have to fend off the retailers until I figure out what the large office tenants want in their building,” Bronsnick said.

As for what those office users want from their retail, it comes back around to the changing preferences of the consumer base and the emphasis on experience.

“Even in Newark, the commentary that we hear from, say, Audible or Mars, is that they want something cool,” Bronsnick said. “They don’t want another CVS or Dunkin’ Donuts, and while it may be more challenging to find the unique shops or restaurants, it’s what makes these places a better urban environment and less cookie-cutter.”