As we get further away from the height of the COVID lockdown and the threat of recession looms, more employers are leaning on their employees to return to the office. Not all office properties are created equal; some will fare better than others. What types of office properties in New Jersey are going to be best positioned for an office comeback?
The return to office is being driven more aggressively by employers than employees. They believe in higher productivity and greater chemistry of working with others in person instead of at home on Zoom. Jeremy Farrell, Director of Government Affairs for Lefrak, told NJ BIZ that “it’s like [what] a basketball player will tell you: you are a talent unto your own, but if you’re playing with other people, you’re going to elevate your game.” Lefrak owns 2.5 million square feet of Class A office in Jersey City, and their vacancy is one-third lower than the Class A average in Hudson County.
So where do employees want to commute? Mid-career employees want shorter commutes and more spacious homes, which makes suburban office parks an appealing option. Younger workers continue to concentrate on cities with better social and entertainment options. The surplus of modern office space in New Jersey presents a world of options for firms looking to get the most out of their return to the office. “The labor market is tight enough where employees in office-oriented industries have negotiating leverage over working from home or seeking a hybrid arrangement,” Thomas LaSalvia, a senior economist at Moody’s Analytics told America’s Commercial Real Estate Show with Michael Bull. “That does not mean that all of them are looking to work from home.”
Office tenants looking to get creative have a golden opportunity to try new strategies to bring employees back to work for the long term. They can try hub-and-spoke models in which employees can commute to the suburban or metropolitan offices that suit their varying needs and lifestyles. They can equip offices with newer air filtration and ventilation systems and keep sanitizers in place to ward off the resurgence of contagious diseases. The post-COVID environment will bring a shift away from the “open office” trend heralded by tech companies in the 2010s, making an increase in private office space a critical part of space utilization plans.
Just as employees are gaining the power of choice in their working arrangements, companies selecting sites have leverage in choosing to commit to New Jersey over Manhattan or relocating to warm-weather, lower-tax states like Texas and Florida. New Jersey’s advantage is in its talent pool: currently ranked eighth in the country in the percentage of advanced degree holders according to the US Census, and its relative affordability to neighboring New York City. The prospect of New York increasing its burden on commuters through congestion pricing and the capacity constraints of its subways make staying on the west side of the Hudson more attractive for New Jersey’s office workers.
The conventional wisdom that resonated through the height of COVID was that office space was a thing of the past. The truth is that selecting the right office space for the future is central to how companies will maximize their talent and stay profitable. While high taxes and cold weather inhibit New Jersey’s ability to sustain an increasingly mobile and flexible workforce, its top talent and proximity to great universities can give office tenants the upper hand.