What does Mack-Cali know that the rest of us don’t? Quite simply, they know how to make lemonade from lemons.

The office market in New Jersey, like the general state of the economy of New Jersey, is moving in slow motion with some sectors on life support. Everyone knows there hasn’t been any new speculative construction of office buildings in years. Most of the existing inventories of office buildings were constructed almost 50 years ago. This was at a time when no money down meant — build it cheap and with someone else’s money.

Major industries like Big Pharma have been packing up and leaving “Dodge” for some time now. In the wake of the slow business growth of the Bush/Obama years we now find the unusual impact of this stagnation and its unintended consequences.

“A State divided is a State with no way out”, and you can quote me on that. Northern New Jersey areas like Bergen County and some specialty markets like Metro Park are almost at full occupancy. By contrast, Morris and Somerset Counties, where the black hole of Big Pharma has had its biggest impact, are extremely weak.

One of Mack-Cali’s biggest portfolios of near vacant office space is in the Parsippany/Morris Plains market. There Mack-Cali owns almost 50 percent of the market and with such density that they are competing with themselves at multiple office properties with more than 1 million square feet of older inventory.

Recently Mack-Cali acquired Roseland Properties, one of the biggest residential contractors in New Jersey. The move came as a surprise to many office market pundits as most were rather curious exactly what Mack-Cali was up to. They quickly announced the construction of new residential Hi Rise towers in Jersey City, and we all thought that was why this purchase was made.

This month however, Mack-Cali has announced the repurposing of 250 Johnson Road, a vacant office property in Morris Plains to new residential units and a new whole world of possibilities becomes clear to me. Why sit with vacant office properties that no one wants when you can construct new residential properties that are in great demand?

While one conversion does not make a trend, I see a real need to repurpose the older infrastructure of both office and warehouse properties to new residential properties across the State of New Jersey. Many of the older warehouses in Northern New Jersey are ancient artifacts, some more than 100 years old, which are desperately in need of new life blood.

What does Mack-Cali know? I hope they know the way forward for the rest of us.

Regards,
Larry