The majority of large companies here in New Jersey are back in the office.  That’s right! Many have hybrid work schedules, however, and so the look of the office is now becoming a much more open and group-friendly one, with less emphasis on private offices and even assigned seating.

With smaller companies, we see a more diverse climate depending upon industry groups.  For example, stable companies like doctors, accountants and financial advisors are mostly back in the office, but some smaller and medium sized companies have a much greater tolerance for remote work, or are just looking at things in the short term.

Readers of this newsletter know that the New Jersey office space model was predicated based upon the long-term lease.  A little history. Back in the 1970’s, New Jersey experienced a building boom leading to the construction of suburban office buildings and parks by speculative developers. Most of the office buildings we see in New Jersey today were actually built way back then and there hasn’t been much new construction since.

The secret to the success of speculative construction was the acceptance by tenants of the long-term lease, which enabled Landlords to customize the space for each tenant and amortize the cost of the work over the term of lease. For the last 50 years this formula has proved highly successful. The long-term lease was the accepted formula by New Jersey companies even as we later suffered through the recessions of the 1970’s and 1980’s, the subsequent savings and loan crisis and even through the Pandemic. It was during those recessions that most of the original “Mom and Pop” entrepreneurial developers were replaced by pension funds and REITS funded by much stronger Wall Street investors, creating tremendous stability and far less volatility. Now jumping ahead 50 years, when the Pandemic hit us, it turned out that many of these stronger more stable Landlords have been able to stay focused and hang on.

So, here we are in 2025, and the cost of new construction has doubled from where it was just 10 years ago.  For the long-term lease model to work today, new turnkey construction now requires a commitment by the tenant for a decade or more.

Are most companies in 2025 stable enough to make long-term commitments?  The answer is, some are, but many are not.  Newer companies and/or those that are still actively growing find that they may need the ability to expand the office in just a few years.

A company where the CEO is planning to retire in a few years may also not be willing to commit to a decade long timetable.

So, Larry, how do companies make long term lease decisions in a short-term economy?  The answer is working with a real estate advisor who understands how to find and create flexible leasing terms in the face of long-term lease commitments. Do you need a flexible lease alternative? If so, why not give us a call to find out why, at Dickstein Real Estate Services, OUR DIFFERENCE IS YOUR ADVANTAGE®.

Regards,

Lawrence Dickstein