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third of all new multifamily units from New Jersey offi ce conversions
have been built in Morris County, indicating its prominence in
residential reuse. Bergen County, with 25 projects, ranks second.
Essex County (20 projects) is the third major locale — this includes
Newark and surrounding suburbs such as Roseland and Livingston,
where some older offi ces have been converted to apartments or
other uses. Middlesex (13 projects), Somerset (8), Union (8) and
Mercer (8) also see notable activity. Generally, in suburban offi ce
corridors like Route 1 (Mercer/Middlesex), the Parsippany area
(Morris), and the Bridgewater/I-78 area (Somerset).
In contrast, much of southern New Jersey has seen few offi ce
conversions to date — for example, counties like Atlantic, Ocean,
Camden and others are not represented in the dataset. South Jersey’s
offi ce inventory is smaller and less overbuilt than North Jersey’s, while
demand for alternative uses is more concentrated in the northern part
of the state. Over time, if offi ce vacancies persist broadly, we may see
the trend expand geographically. For now, the “hot spots” are North
and Central Jersey towns that boomed with offi ce development in
past decades and now are ripe for repurposing.
The developer’s perspective: Challenges and opportunities
Converting an offi ce into a new use is a complex undertaking
— not every empty offi ce building can or will be converted.
Developers and investors considering these projects must
navigate a host of challenges:
• High costs and construction complexity: Offi ce-to-residential
conversions, in particular, are expensive and fraught with risk, often
approaching or exceeding the cost of ground-up development.
Older offi ce buildings may have large fl oor plates unsuited to
apartments, require substantial reconfi guration for plumbing and
windows, and in most cases make more sense to demolish entirely.
Many New Jersey projects (e.g. Fairways at Cranford, The District at
15fi fteen) opted for demolition and new construction of housing, as
retrofi tting the existing structures were not feasible. Conversions to
warehouses also usually involve tearing down multistory offi ces to
build single-story industrial facilities. All of this adds cost and time.
• Zoning and approvals: Repurposing an offi ce often means
obtaining new zoning or variances. Some New Jersey suburbs
have outdated zoning that doesn’t easily allow residential or
industrial on sites long designated for offi ces. Flexible zoning
is crucial — if a town is not receptive and speedy in approvals,
a conversion deal can die on the vine. New Jersey’s home rule
land use environment can be challenging; community opposition
(NIMBY-ism) sometimes arises if residents object to apartments or
truck traffi c on a former offi ce site. Successful developers invest
heavily in navigating local politics and community outreach to
get projects approved. However, there are signs of progress —
recognizing the need, cities are starting to ease zoning hurdles
and even provide incentives for offi ce conversions. That said,
conversions to warehouse/distribution facilities have been met
with increasing resistance across the state.
• Financial feasibility: Even if market demand exists for a new use, the
numbers must pencil out. Many offi ces still carry high valuations on
owner balance sheets (or lender books), and taking a loss to redevelop
is painful if not avoided. Rising interest rates and construction costs
in recent years have made fi nancing conversions tougher. Developers
often look for public-sector incentives or subsidies (tax credits,
abatements, low-interest loans) to help offset conversion costs.
Projects that offer affordable housing components, or that revitalize
a struggling area, are more likely to secure such support. On the
fl ip side, if an offi ce can still attract some tenants or was recently
upgraded, owners may hold out rather than convert. Thus, the
pipeline of conversions tends to be dominated by deeply distressed
or outdated properties where the value-as-offi ce has fallen so low that
conversion becomes the best option.
Despite these challenges, opportunities fl ourish for those who
can execute conversions well. For local communities, replacing a
vacant offi ce with a thriving apartment complex, logistics center or
other alternative use can boost the tax base and bring new vibrant
activity. For developers and investors, conversions represent a way
to capitalize on the “new normal” of real estate demand — trading
excess offi ce space for in-demand higher-end asset classes. The
momentum in New Jersey shows that more players are entering
this arena. In fact, some investors have been specifi cally hunting for
underused offi ce properties as conversion candidates, effectively
arbitraging the gap between weak offi ce values and strong
multifamily and industrial alternative use fundamentals.
Outlook and conclusion
New Jersey’s wave of offi ce-to-residential and offi ce-to-industrial
redevelopments is likely just the beginning. With offi ce utilization
expected to remain lower in the hybrid work era, the structural
oversupply of aging offi ces will persist. At the same time, the
appetite for housing (especially in walkable suburban settings and
transit hubs) and
for logistics space
(close to consumers
and infrastructure)
remains high. These
conditions set the
stage for continued
conversion activity
in the coming years.
We can expect
the pipeline of
proposed projects
to grow as more owners come to terms with the new reality and
as municipal governments adjust their master plans to encourage
adaptive reuse.
For developers and investors, New Jersey’s experience offers
valuable lessons. It underscores the importance of creative vision
and patience; not every empty offi ce is a goldmine, but with the
right plan, even a hulking vacant complex can be transformed into
a successful, community-enhancing asset. It also highlights the
need for partnership with public-sector stakeholders: Streamlined
approvals, zoning fl exibility and possibly fi nancial incentives will be
key to turning many conversion concepts into reality. Encouragingly,
policymakers around the country (and in New Jersey) are exploring
ways to make conversions easier, from tax credit programs to relaxed
zoning rules. This support will lower barriers for projects that might
otherwise be on the fence economically.
New Jersey has positioned itself at the forefront of the offi ce
conversion trend. The state is forging a path in redefi ning obsolete
offi ce stock, exemplifying how adaptive reuse can address
today’s needs: providing homes for families, modern facilities for
businesses and new life for dormant properties. For occupiers,
these conversions mean new options (whether it’s a brand new
apartment near a former offi ce park, or a warehouse in a location
that previously had no industrial space). For investors and
developers, they represent a compelling avenue for growth, albeit
one that requires expertise and careful execution. Above all, New
Jersey’s experience illustrates a broader principle in commercial
real estate: adaptability. In an evolving economic landscape, the
ability to repurpose and reinvent real estate is proving to be a
crucial advantage. New Jersey has embraced this challenge, turning
boardrooms into bedrooms and big boxes.
Jeffrey L. Heller is a 38-year commercial real
estate veteran. He has acted as an advisor
and agent to a wide variety of corporations,
investors and owners throughout the world.
His primary responsibilities include the
representation of clients in the acquisition
and disposition of corporate facilities,
agency representation, lease negotiations
and fi nancial analysis on a local, regional,
national and international basis.