The Evolution of a Market: The Changing Morris County Office Market
By: W. Joshua Levering, SIOR, Senior Vice President and Branch Manager NAI James E. Hanson Morris County Office
Morris County, N.J. has long been known for its bucolic rolling hills, unique towns, and its deep history and culture. It is sometimes easy to forget that Morris County is also a hotbed for business with thousands of companies calling the county home and many international corporations planting their headquarters within the county’s 480 square miles.
A Home for Business
In the shadow of New York City, Morris County has always been heavily influenced by the macroeconomic forces that power the financial capital of the world. The dominance of the county as a true suburban office market can be traced back to a couple of major factors arising in the early 1980s; a steady increase in NYC property prices and the confidence by many firms to relocate to the suburban office market in NJ.
As companies grappled with rising property rents, built in expense increases such as porter-wage and high utility costs, New York City became an unnecessary percentage of operating budgets for many firms, and they began to experiment with offices across the Hudson in locations such as the Meadowlands and Metropark. At first, it was typically smaller companies or small divisions of larger firms making the move and as they saw the benefits, larger firms too began to move west. New Jersey provided both stability of expenses and a way less rental rates. With a large inventory of available property for new development, easy accessibility and a very large, highly-educated labor pool, Morris County made its mark as a draw for companies looking for larger back-office and even headquarter offices. Early in the Morris County office market upswing, AT&T dominated as the biggest user and occupied somewhere over 40 percent of available office space in the county alone. Downtown Morristown and the corridor we refer to as Madison Avenue was already well developed and with Morris County having such a rich history it became very accommodating as a local to both live and do business.
Amidst a substantial occupancy by AT&T in the mid-1980s, the market was poised to grow. With the development and extraordinary demand by corporations for office space at the full-service park known as Prudential Business Campus (now better-known Morris Business Center) this was essentially proving the Suburbs of Morris County were a perfect place to work and live. Morris County basically dominated as an area of interest for companies to locate thru the late 90’s. It was a go-to location for development of suburban office buildings and parks. Morris County office buildings now accommodated companies of all shapes and sizes spreading out from the county’s main arteries of 80/287 to include many suburban locations accessible via Routes 80, 287, 24/78, 202, 206. Unfortunately, most new development came to an end during the Great Recession leaving many partially or completely vacant office buildings throughout the County.
Morris County Today
To a large extent, Morris County’s office market is still recovering as many firms downsized, relocated, and/or completely changed their business model based on modern occupancy standards and technology needs. The challenges presented by our markets today are numerous. Very significant is the current unbalanced supply situation in the county as hundreds of office spaces, designed in the 1980s and 90’s, are now functionally obsolete with outdated parking, connectivity, amenities and layouts. On top of this, many buildings have significant debt and/or financial issues, that made them even less desirable.
On the positive side is a number of newly built, updated or completely renovated trophy properties now occupied by noteworthy firms such as BASF, Honeywell, Realogy, Avis/budget, Medicines Companies, Zoetis just to name a few. Developments such as The Green at Florham Park, Park Ave. at Morris County and other more modern building’s and parks can boast almost 100 percent occupancy. Morris County today is deemed to be home to the largest concentration of corporate headquarters within New Jersey and is also recognized as one of the largest concentrations of pharmaceutical companies in the United States.
It is believed the county is in the midst of a rapidly growing housing crisis as affordable and working-class housing has become a rarity and many workers are forced to commute almost an hour each way to work on a daily basis. Although our local Morris County labor force is deep, very well-educated and in high-demand, it is becoming less and less affordable for them to reside in Morris County while making fit more and more difficult for Morris based companies searching for top talent.
Despite many challenges, Morris County is still, and will continue to be, a place where companies want to do business. With this in mind, many developers and investors have seen success in adaptive reuse of well-located existing office structures instead of ground-up construction. Given a lack of available development parcels for ground-up new development, the re-development, renovation and upgrading of existing properties is ongoing and brisk. Investors and developers are looking at vacant or partially vacant office properties, underutilized land parcels and most any opportunity to create ‘a diamond out of the rough’ and build modern, amenity-rich spaces geared towards today’s corporate tenant needs. Through updating the design, amenities, and layouts of office space, and in most cases adding amenities of a retail and residential component, developers have been able to create value from properties that were previously antiquated buildings and sites. We anticipate as the New York City office market once again faces huge rents and a shortage of space, companies will again begin looking west. And again, once again, Morris County will be ready to receive them.
Why NAI Hanson?
The one constant during the boom, recession and recovery cycle of the Morris County office market has been NAI James E. Hanson with decades of experience in the Morris County commercial real estate market. Our experience in Morris County has allowed us to build the relationships with investors, developers and vendors that have enabled our firm to find success where many other brokers have not. If you are an owner of an office property, an investor in office properties or a business looking for a new space, reach out to me today at (973) 240-2102 or email@example.com to learn more about how NAI James E. Hanson can help you with your Morris County office needs.