If you’ve ever thought the buildings of the Route 1 corridor have a 1980s look to them, you’re not alone. James W. Hughes, dean of the Edward J. Bloustein School of Public Policy and Planning at Rutgers, is predicting a massive re-invention of the commercial real estate market, especially in the Route 1 corridor.

Hughes will present the economic outlook forecast for Middlesex County, including the commercial real estate market, on Thursday, January 19, at 8:30 a.m. at the Hyatt Regency New Brunswick. For more information, visit www.mcrcc.org.

The most important feature of the state’s supply of office buildings, Hughes says, is the fact that they were almost all built between 1980 and 1990 during a huge economic boom that saw the Route 1 Corridor go from farmland to corporate playground.

By 1990 80 percent of all office space in the state had been built in the previous decade. That share has shrunk somewhat over the intervening 23 years, but not by a whole lot. Now the region is left with offices between 23 and 33 years old that were built for a different economy.

“When the boom started, your information technology was a black rotary phone, an IBM Selectric typewriter, and a Texas Instruments business calculator,” Hughes says. “Pentium machines and fiber optic cabling and the like really hit in the 1990s.”

Not only have the tools of work changed, but its very nature has also changed dramatically. “In the 1980s, work was basically standardized routines: repetitive procedures, manual billing, and a lot of manual ledgers. Today, what takes place in office buildings is not routine work. It is creative. The routine work is now done by computer or it’s been outsourced to Asia, where they do still need to have manual processing.”

Workplaces need to reflect new ways of working. “Buildings have to be adapted to the new way of working,” Hughes says. “A lot of new spaces don’t have individual offices. They have a lot of team project rooms and some quiet focal attention spaces if you need them. The offices admit more daylight. They’re designed for ‘casual collisions,’ where supposedly, new ideas come from. It’s when you just meet somebody casually and start talking to them, and it goes back to the old Bell Labs model of discovery.”

Most employers are looking to fill their ranks with workers who are about 23 to 35 years old, who work in this model; they are about the same age as those stuffy office buildings. However, Hughes says, they are having trouble attracting them to work in remote suburban headquarters. Young workers want to live near what Hughes calls “centers of activity.”

“The baby boomers, aged 46 to 64, represents the workforce of the past,” Hughes says. “The new generation, whether you call them the ‘Echo Boomers” or the ‘Millennials,’ was born in 1977 through 1995. They’re 20-somethings and young 30-somethings, and they don’t find suburban office campuses particularly attractive.”

Hughes says these coveted employees will prefer to work in places where they can afford to live near a cool urban center. Hoboken, Morristown and the Princeton area are booming for this reason, he says. Although the Princeton area may seem like an unlikely location for those preferring an urban environment, the downtown area of the town is a real center of activity. Because Princeton itself is unaffordable, many of these workers choose to live in places like Plainsboro, where ample garden apartments are available at affordable rates, and where they can easily commute to nearby jobs.

Princeton, he says, is a good model for this future of suburban differentiation. Highly paid executives can afford to live in the actual town of Princeton, where seven or eight-figure houses are available. Workers can live in the nearby suburbs, where they can commute to work and enjoy the amenities of the town.

In this way, the commercial and residential real estate markets are inextricably linked, Hughes says, and that will be the case in the future. On the other hand, places like Whitehouse Station, where Merck is abandoning its campus, and BASF on Route 80 in Western Morris County, appear to be doomed.

“Those far-out places represent the past,” Hughes says. “Whitehouse Station: if you want a 10-acre lot, that’s a good place to live, but I don’t know too many 20-year-olds who want a 10-acre lot or can afford one.”

Hughes predicted the wrecking ball may be coming for some of the more outdated properties, which will see rental housing rise in its place: think the Avalon Bay project in downtown Princeton, built on the site of the old hospital.

Other properties, he believes, will be renovated to avoid this fate. A good example of that path is the old Merrill Lynch campus on Scudders Mill Road, which was completely overhauled and re-opened as Novo Nordisk’s headquarters. (See “Novo Nordisk Finds a New Home in Recycling,” U.S. 1, June 12, 2013.)

Either way, expect big changes to the local commercial real estate market. The Route 1 corridor may be about to lose some of its ’80s retro look.

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