Business Roundtable: Why is Warren's Office Space Sitting Empty?

Each month, we'll ask local business owners and leaders a question of interest and concern to local businesses. This month's question is:

Retail storefronts in Warren are filling up, with occupancy above 95 percent—but office space remains open. Several new projects await tenants, and some older buildings are also lagging in finding new tenants. Do you see the slow leasing of office space as a sign of the slow economy or of the general demand for small offices in community like Warren? Is there a need—or a way—to increase the diversity of businesses leasing office space in Warren?

Paul Stillwaggon, real estate agent with Weichert Realtors/New Jersey Estates: With few exceptions, most of the traditional bigger service and pharma companies that typically lease our buildings are downsizing. Some are cutting staff, relocating staff to other locations, “doubling up” in work spaces, or, have staff work from home.

The issues facing these bigger companies certainly reflect current economic conditions – US and global. New Jersey continues to remain a very difficult place to remain competitive due to over-regulation, taxes, health care costs, utility costs and the general high cost of living. Even with very reasonable square foot costs and creative lease deals offered by building owners, activity is slow.

We do see some activity in smaller start-up companies, some with overseas home bases.

We do think that Warren remains a very desirable location for business due to proximity to Route 78 exits 33 and 36, Newark Airport and LehighValley Airport. However, unless larger companies decide to relocate here in Warren from more expensive locations, e.g., NYC, I don’t think we will see a demand from existing area business to expand into the larger vacant office spaces for some time to come.

In terms of increasing the diversity of businesses, this may involve relaxing or expanding current zoning requirements to permit certain business uses which may either be prohibited in Warren, or limited to certain locations.

Monica Giglio, Color and Design Consultant at Warrenville Paint and Hardware: I think the low occupancy of Warren's offices reflects the work-from-home trend that many business owners are embracing. When you add to that the high cost per square ft to rent commercial space, and the sluggish economy, it's no surprise that offices remain vacant.

Jeanne Feenick, real estate agent with Keller Williams Real Estate: It always comes down to supply and demand and the changing economic conditions have been the primary driver to both excess supply and a shortage of demand. The new(er) commercial space that we see today would have been in the planning stage when the market was roaring, resulting in inventory that reflects a more robust economy and too much of it.

Demand is low due to the unrelenting tough economic conditions of the last few years. I see small business owners challenged by the difficult times, in some cases closing shop, in other cases consolidating with others to share support resources and build scale. Either way, additional office space will be vacated, adding to what is already a glut of inventory.

In my experience, given the choice, newer space is preferred. If priced attractively, the newer spaces will move more quickly than the older ones. Put another way, the older space must be priced razor sharp and offer attractive overall terms in order to be considered by the few that are looking.

Another complication is that Warren’s space competes with space in neighboring communities—most especially Watchung. As you move down Mountain Boulevard, you hardly realize you’ve crossed the line. And in the other direction is available space in Martinsville. If I were advising the owner of older commercial space, I would include the properties in these neighboring communities because in my experience, prospective business tenants see little downside in crossing the line if there is money to be saved or the space better suits their needs.

I worked with several small business owners looking for space in Warren in the last 12 months. In one case, the goal was to relocate a two-man office closer to their home in Somerset County and we looked at smaller spaces in Warren and Watchung, along Mountain Boulevard and King George Road. He far preferred the newer spaces but they were generally too expensive for his budget, and in many cases too large. Mid-stream, job jitters caused him to halt the search and decide to operate out of his home. In another case, the client was looking for new and upscale space to expand a business she has in Princeton. Her goal was to also buy a residence in town and sell her current home in Essex County, but sluggishness on the sale side, and a lack of high-end townhome inventory in Warren, zapped the urgency. She will only consider the commercial space if she finds the right residential space. Two very different experiences, but two very real and very close commercial opportunities that were undone by economic factors.

This topic prompted me to go back to the MLS and check the status of the many properties that I showed these clients and found that they are all sitting unoccupied and most are still at the same price. Time on the market is not the friend of the seller/landlord and sitting at the same price month after month is a losing strategy, just as it is on the residential side. Supply is high, demand is low—the result is a price war among contenders. My advice to owners of commercial space is to assume that there will be only one prospective tenant for a space like yours and do what you have to do to stand out to be the one chosen among the crowded field. The way to do that is to present an attractive space, offer the best price and be flexible on terms. Doing anything else will just result in more time with no income coming in to offset the uninterrupted carrying costs.

I am primarily a residential agent and I will tell Warren residents that from my perspective it is a tremendously positive to see the storefronts filling up. The vitality of the downtown ranks high on the wish list of homebuyers as they target communities. As the storefronts fill up our downtown becomes more interesting and attractive and that will continue to have a positive effect on the Warren market overall.

Vic Sordillo, Township Committeeman and Vice President and Home Office Loss Control Manager for Chubb Insurance: I believe that we will see a recovery in all areas of the economy over the next 12 to 36 months. Retail operations are the first visual sign of this. I know of several individuals who had or could have office space but prefer to run the business from their homes. It is short term reaction to the uncertainly of the near future and the desire to keep expenses down. Retailers do not have this option.

Some of our office buildings are being marketed as medical use. Many have requested approval for this change of use. The Planning Board and Board of Adjustment have supported those requests that have a neutral or positive impact on the community. Tax rates on occupied buildings are greater than those that are vacant and the revenue from those operations help keep home taxes down.

Have a question for local business leaders? Sent it to johnpatten@patch.com