Stranded Assets A Systemic Problem, But Also An Opportunity for New Jersey

Sam Brookham is a planner with PlanSmart NJ who studies the impact of stranded assets on local economies.

TRENTON, NJ— Stranded assets, mostly abandoned or nearly vacant office or retail properties, are a systemic problem and a redevelopment opportunity for New Jersey, according to Sam Brookham , a planner with PlanSmart New Jersey, which conducted an all-day conference for developers, planners, and policymakers at the state’s underused War Memorial building here Tuesday. “One out of five retail or office assets is stranded, one in every three municipalities has stranded assets, and one in ten of these are completely vacant,” Brookham says. “At the current rate of consumption it will take more than two decades to redevelop that space, and that doesn’t even account for the new properties coming on the market that are going to be cannibalizing that space.” The changing demographics of New Jersey’s population have had a lot to do with the rising tide of stranded office assets, and it’s having a serious impact on municipalities, Brookham says. As Baby Boomers age and retire, there is less interest in single-family suburban homes near remote office parks. Millennials, and even retiring Boomers, are looking for housing options closer to city centers, where transit options are available and social and cultural options are nearby. Since 2009, one third of New Jersey municipalities have seen the value of commercial land drop by five percent, and stranded asset sites declined in value by about $300 million during that time, he says. The average stranded office asset represents 130,000 square feet, and a loss of about 584 jobs. Towns with such assets lose an average of $14,000 in lost lunch spending alone, Brookham says. A study conducted in Washington, DC, showed that walkable urban areas were more than twice as valuable as suburban areas, he says. A recent study showed half of adults, not just Millennials, want walkability, and two-thirds want bike paths and diverse transportation options, he says. The way people shop is also having an effect on the value of commercial assets, Brookham says. Telecommuting has doubled over the last ten years, and car trips to big box stores and malls are down more than 20 percent. E-commerce is expected to grow by 44 percent by 2019. “Between 2000 and 2010, the number of owner-occupied homes dropped by 100,000, but the population grew by 400,000 over the same time,” Brookham says. “It’s estimated that between  2010 to 2030, there’s going to be five new renters for every three homeowners.” “If the demand for higher density development were really recognized, there would be a $160 million cost saving for New Jersey,” he says. “Ignoring the demand of residents continues to push renters out of state as they continue to seek the lifestyles they demand.” New Jersey continues to struggle with 14 million square feet of stranded office space – the equivalent of seven Empire State Buildings — and more than 7,000 acres of surface parking. “It’s going to require leadership, trust and creativity,” Brookham says. “These properties present an unprecedented level of opportunity for innovation and revitalization.”