What will fill empty NJ office space? See the creative ideas at the Jersey Shore

By David P. WillisAsbury Park Press

• A building spree that started in the 1980s filled New Jersey with an unprecedented amount of office space.
• A post-COVID world, with its virtual technology, and shrunk demand for large office properties.
• Owners are now finding unusual tenants to fill those old acres of cubicles.

What do you do when large tenants aren't there to lease office space in your big empty office building?

Do something else with it. Maybe you can turn it into a medical building or demolish it to build a warehouse, convert it a mixed-use space with retail on the ground floor, or build housing instead.

It's called "adaptive reuse," and developers are turning to it as they seek to fill or repurpose large vacant spaces, whether it be a tired building in downtown Red Bank or a large old corporate campus in Holmdel.

"During and after COVID, there was a lot less demand for large office space, so the owners had look for some alternative uses to be able to fill up the buildings," said Suzanne Macnow, senior vice president at CBRE, a commercial real estate brokerage.

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"When you have a 100,000-square-foot vacant building, they are not easy to fill out with" tenants who want 25,000 square feet, she said.

Looking for examples? Construction is underway for a new Red Bank Veterinary Hospital at 100 Shulze Drive, converting a four-story building at River Centre, an office complex off of Newman Springs Road in Middletown, said Macnow, who brokered the deal.

Monmouth Medical Center's Vogel Medical Campus at Tinton Falls is being built on the footprint of what was formerly the old sprawling Myer Center and Night Vision Lab at Fort Monmouth.

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How did we get here? It started in the 1980s, with a spree of office construction the likes that New Jersey had never seen.

"We are seeing the aging of what was once the greatest office building boom in the history of New Jersey," said economist James Hughes, dean emeritus of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. By 1990, 80% of the inventory of office space in the Garden State was built during that 10-year period.

White-collar work grew, fueling the need for large office spaces. But innovation in information technology, such as the development of more powerful computer chips and desktop computers, the internet and the smartphone, began to herald a change, Hughes said.

"We didn't have to have legions of clerks doing all sorts of work," Hughes said. "All of that was automated."

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'Overbuilt and underdemolished'

The COVID-19 pandemic, which darkened office buildings in 2020, changed it all. Employees worked from home. Meetings were held over Zoom or Microsoft Teams.

"We had five years' advancement in five weeks that has changed the nature of work forever," Hughes said. And it led to lots of excess office space. "We could say it is overbuilt and underdemolished," he said.

Now for workers, return-to-office is a mixed bag.

When small tenants got the green light to return to the office, they went back, said Mark Fowler, senior vice president at Lee & Associates. "The large corporations were the ones that went to remote working and have struggled to get their employees back in."

Companies are now looking for smaller spaces with shorter lease terms and amenities. "It is a flight to quality," Fowler said.

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People don't want to work in older buildings in the suburbs anymore, Macnow said. And they're just too expensive to renovate.

"The flight to quality offices is real and for owners of large office buildings that are not in good locations, with amenities and near local stores, restaurants and major highways, they have been, and will continue to struggle leasing space," she said.

Where's it all happening? Here are five places to watch:

Holmdel

A month ago, an affiliate of Community Healthcare Associates, a Bloomfield developer, closed on a $17.5 million deal to buy 23 Main St. in Holmdel, a 350,000-square-foot office building and former headquarters for Vonage.

A spokesperson for CHA Partners, which owns, manages and operates more than 3 million square feet of property in the tristate area with commercial, health care, senior living and multifamily projects, could not be reached for comment on its plans.

Some of the projects on its website include the Muhlenberg Medical Arts Complex, and The Randolph Apartments in Plainfield, which was formerly all part of the Muhlenberg Regional Medical Center campus; Salem Medical Center in Salem; and Totowa Medical Arts in Totowa.

Holmdel Mayor DJ Luccarelli said the new owner has requested a "blight study" for the building, an early step that can determine whether the property is ripe for redevelopment.

"My hope would be to use the existing building for a purpose," Luccarelli told What's Going There. The township has "no interest in high density housing or any kind of residential" development.

"Not knowing what is going to happen yet, I think we would be more interested in a resuse of the existing building," Luccarelli said.

Middletown

Red Bank Veterinary Hospital has leased 110,000 square feet at River Centre and is expected to open in May, said Maurice Zekaria, president and chief executive officer of Paramount Realty, which along with First Mile Capital/Crown Acquisitions, owns the office complex.

It was an important lease for River Centre, which in the midst of a $25 million project to upgrade the entire complex. "Given current market conditions, to lease 110,000 square feet to one tenant on a long-term basis puts us in a better position to stablize the rest of the current campus," Zekaria said. "Financially, it was a good deal for us."

The new hospital will be nearly double the size of its current facility at the corner of Hance Avenue and Apple Street in Tinton Falls. "It is going to be incredible," Zekaria said.

Eatontown

Garden State Veterinary Specialists, the Tinton Falls-based 24-hour veterinary hospital, is converting office space into a new home on Industrial Way West.

The specialty critical care veterinary hospital has leased just over 51,000 square feet of space inside an office building at 246 Industrial Way in Eatontown's industrial park, more than triple the space of its current hospital.

A representative could not be reached for comment.

Hazlet

About a year ago, Brookdale Community College's announced that it had sold its former Hazlet campus at 1 Crown Plaza for $3.5 million. The sale of the building should close by the end of the year, said Macnow, the broker.

The new owner, an appliance store, plans to convert the 30,473-square foot two-story office building back to a previous use: a warehouse, according to documents filed in town hall. It will be used to store appliances.

Red Bank

Denholtz Properties is in the midst of an extensive renovation with substantial improvements to the interior and exterior of 140 Broad Street in Red Bank.

The 37,351-square-foot downtown building, which sits at the corner of Broad Street and Reckless Place, was old and formerly home to a bank branch, dance studio and home health care company.

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"A traffic light corner with parking in Red Bank is literally impossible to come by," said Steven Denholtz, president of Denholtz Properites. "It was immediately attractive."

Once a potential expansion office location for Denholtz Properties, it caught the attention of UBS Financial Services, which signed a 10-year lease for the ground floor. The second floor is being marketed for lease, Macnow said.

Fort Monmouth

Denholtz Properties has converted the former commissary at Fort Monmouth, which had served as a food and general store for the post.

It's now a mixed-use building with food and beverage related tenants: Birdsmouth Beer brewery, MGT Foods and Baseline Social, a food and entertainment venue, Macnow said.

And there's Netflix.

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Netflix will have to clear at least 95 buildings at Fort Monmouth to build its promised $850 million film and TV production campus.

Netflix, which won the bid for the Fort Monmouth Mega Parcel just under a year ago, will need the land in order to build its many sound stages and backlots. That number could grow because the streaming giant is not obligated to keep any of the buildings that currently sit on the 292 acres of the Mega Parcel it intends to buy.

David P. Willis, an award-winning business writer, has covered business, retail, real estate and consumer news at the Asbury Park Press for 25 years. He writes APP.com's What's Going There column and can be reached at dwillis@gannettnj.com. Please sign up for his weekly newsletter and join his What's Going There page on Facebook for updates.