Suburban landlords trying to compete with sleek urban office settings are finding new ways to step up their game.
Property owners in New York’s suburbs are investing heavily to remake bucolic corporate campuses built during the 1980s and 1990s, adding glass facades for natural light-filled offices and retail space for restaurants, cafes and, in at least one case, a supermarket with specialty services.
They also are rolling out features such as modern fitness centers, bike-share programs, walking trails and spacious lobbies as spaces to socialize.
“It’s all about landlords trying to attract tenants, and tenants trying to attract millennial recruitment,” said Daniel Loughlin, broker lead of real-estate services firm JLL’s New Jersey office.
The suburban office market has lagged behind the New York City office market during this expansion, as preferences shifted to urban settings with restaurants, shops, nightlife and mass transportation, brokers and executives said.
But the suburbs continue to have a larger share of the region’s jobs than the city, noted Kenneth McCarthy, principal economist for real-estate services firm Cushman & Wakefield. As of December, 54.6% of the jobs in the New York metropolitan area were in the suburbs, according to his analysis.
As companies consolidate offices and look to take less space, landlords and investors are betting that overhauled, amenity-laden suburban office properties will attract large tenants already in the suburbs.
On Long Island, the owner of an 800,000-square-foot office campus in Islandia is in the early stages of planning to revamp the property for multiple large tenants, said Brian D. Lee, a principal at Newmark Grubb Knight Frank, which is working with the owner, Jay Johnston, who has negotiated extensions of about $178 million in loans, the bulk of which matured in August.
Mr. Johnston plans to add amenities to those already available, which include a day-care center, fitness center, basketball court, ball fields and a helipad. He said he hopes the current tenant, software company CA Inc., remains as a tenant after its lease expires in 2021. CA said it hasn’t made any decisions about its offices.
In New Jersey, Rubenstein Partners LP and partner Onyx Equities LLC in 2013 bought and then modernized a 1970s-era, 306,000-square-foot office building in Basking Ridge, N.J. They spent about $11 million to replace the metal panel exterior with a glass curtain wall, renovate the auditorium, lounge areas and lobby and redo the cafeteria for gourmet-type food service, said Stephen Card, a Rubenstein principal.
Last year, pharmaceutical company Daiichi Sankyo Inc. signed a lease to consolidate two New Jersey offices at the building, Mr. Card said. Daiichi said it consolidated to realize efficiencies and strengthen collaboration.
Rubenstein is using the same strategy at an office park in Whippany, N.J., that once housed data centers for financial firms. The company and its partner, Vision Real Estate Partners, demolished one of five buildings to create a great lawn and walking paths, established a bike-sharing program and created an amenity building with a fitness center, lounges and conference center in space that once held turbines.
Onyx Equities is in the midst of another makeover at a building at 340 Mt. Kemble Ave. in Morristown, N.J., purchased for $7.5 million last year at an auction. Onyx is putting in a glass facade, new mechanical systems and a new lobby, as well as amenities such as a cafeteria and conference areas, said Tim Greiner, executive managing director at Newmark Grubb Knight Frank, which is leasing the building for Onyx.
“The only buildings that are leasing are buildings that landlords are investing in,” Mr. Greiner said.
Simply being near a hip urban setting isn’t enough, said Michael J. DeMarco, president of real estate investment trust Mack-Cali Realty Corp. The Mack-Cali Business Center in Parsippany, N.J., has two hotels and a restaurant and is near downtown Morristown.
Wegmans Food Markets Inc., a supermarket chain known for specialty services, is set to open a location on the edge of the office park this year.
Mack-Cali, which owns about 1.9 million square feet of space in the park, is planning to bring in a 70,000-square-foot fitness club, another hotel and four or five restaurants nearby.
“Food has become an incredibly big thing for millennials,” Mr. DeMarco said. “When you were younger, you’d go out and get a sandwich. Now you get sushi.”
Before the South Boston waterfront was dubbed the Innovation District and Kendall Square flourished as a global hub for life…Learn more
Suburban landlords trying to compete with sleek urban office settings are finding new ways to step up their game. Property…Learn more