The office market was hit hard by the COVID-19 pandemic as executive orders forced companies to shut physical facilities. Landlords also incurred extra costs in preparing to reopen, installing new systems or implementing new protocols to ensure the health and safety of employees and occupiers.
To get a better view of what the commercial real estate market in the tristate area will look like moving forward, NJBIZ reached out to Jeremy Farrell, special counsel and senior managing director of Government and Community Affairs at LeFrak.
LeFrak is a family-owned property company that has long been committed to community development and long-term ownership. Newport, the company’s mixed-use development in Jersey City, shows how people can live, work and play on the Hudson River waterfront. Residential, office and retail space, along with a hotel and an on-site PATH station offer residents and tenants a variety of amenities. There’s even a beachfront to enjoy during the warmer months.
Farrell offered a glimpse at how LeFrak has approached the changing demands of the industry during the pandemic and how the company worked to make tenants comfortable, as well as what it is doing for these businesses moving forward. He said the current situation is constantly changing and landlords and tenants alike are coming up with creative solutions to achieve outcomes beneficial to all.
“In those moments of challenge also comes innovation and creativity and perseverance. And so I think that is the true testament to the next step of what’s going to happen here in New Jersey and in the country,” Farrell said. He noted that many office workers are still staying home and not physically coming into the buildings, so businesses had too much space. LeFrak responded by offering a “spec suite.”
A spec suite offers the ability to have a small business of say 10 or 15 people working in an area where it is easier to socially distance or stagger work times. Suites can be renovated and brought to hire with COVID-19 protections faster and with less disruption.
“Basically, what we are doing is we are trying to be responsive to how businesses are going to purchase space in the near term. And this is a transition that really started pre-COVID, but then was amplified by COVID,” Farrell said.
“You know, the days of companies coming into a space buying a whole floor, buying multiple floors buying a whole building, taking it raw, finishing it themselves, maybe getting an incentive for a build-out and then finding a long term lease. That’s not going to be the norm.”
Although Farrell said there were some that would still work in that capacity, but he agreed it wouldn’t be the norm for multiple reasons – not the least of which is businesses are shifting to smaller platforms. Instead of taking 20,000 square feet, a company may only take 2,000 square feet for functions such as accounting. And Farrell said he sees the trend catching on not only with the bigger corporations, but in small business too.
“I think we’re seeing the surge of small businesses that need office space, but on an economy of scale analysis. If you are a small business, then there isn’t necessarily an advantage of really being up and running with all those resources to build out a full, big office. And so that’s where that opportunity comes for us to provide these suites where we can say, hey, come in with your small business, you don’t have to worry about all the cost and logistics of getting up and running. Just plug in, turn on your utilities and go to work.”
In Newport, Farrell said LeFrak started offering spec suites in 111 Towns Square Place, one of its more mature assets. Instead of taking floor plates and trying to offer them up raw, the company broke up a floor and built it into spec sections. This type of offering was attractive to smaller tenants that can’t afford to build out space and the cumbersome permitting process.
“All you have to do is come and go to work. And that is more efficient for everybody. It is quicker,” Farrell said.
“Not only that, most importantly, what it does is it allows these companies to establish themselves and to mature into a place. They can say, ‘Hey, we’re going to stay in the suite – or we’re going to finish. We want to modify it.’ Or ‘now we’re ready to go into a bigger suite that we can finish ourselves.’”
Farrell said the size of the spec suites range from 2,000 square feet to 15,000 square feet. And an added bonus is that the suites are designed to be seamlessly combined, so a 4,000 square-foot suite adjacent to a 5,000 square foot space can easily form a 9,000-square-foot office.
The suites have all the COVID-19 safety standards, with everything from high-performance HVAC systems to biometric temperature reading devices to sanitizing stations. The buildings have been completely outfitted and there has been a very aggressive cleaning schedule of high-touch areas.
Farrell said the spec suites concept existed before COVID, but demand is greater now. Some tenants who have taken such spaces include Infobip with 5,050-square feet; Atrium Staffing with 4,721 square feet; Signature Consulting Solutions with 2,250 square feet; the Walton Family with 6,550 square feet; Liquidity Match with 4,275 square feet; HCC/Tokio Marine Insurance with 3,345 square feet and Global Shares with 2,500 square feet.
Farrell said the renewal of the state’s corporate incentives programs is also boosting demand. “We applaud Governor Murphy and the New Jersey legislature for taking action and instituting the New Jersey Emerge incentives program at a time when New Jersey needs it most. It will be an essential tool to help Newport Jersey City compete as one of the tristate areas best value propositions to attract leading-edge companies.”