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Can Hipsters Learn To Love Office Parks?

office park in Creve Coeur, Missouri
photo by Paul Sableman

Although it doesn’t happen too often, sometimes the obvious answer to a problem actually turns out to be the right answer. Or at least a part of it.

In this case, the problem is too much office space, particularly older office parks, and too much retail space, particularly malls, in the nation’s suburbs and small towns. At the same time, the shortage of rental homes and apartments is increasingly pinching urban dwellers in San Francisco, New York and other major urban areas. Thus the obvious answer: When you have too much of one thing and not enough of another, convert the first thing to the second.

National Resources, a developer based in Greenwich, Connecticut, plans to turn a former corporate site in East Fishkill, New York, into housing units priced at about half the rents in New York City, largely in hopes of luring frustrated renters out of the five boroughs. Other developers, too, have looked at neglected office parks as potential residential or mixed-use development sites. They will have plenty to choose from. A 2016 report by real estate firm Newmark Grubb Knight Frank found that 14 to 22 percent of suburban office inventory was “in some stage of obsolescence” in suburbs near Denver, San Francisco, Chicago and Washington, D.C., along with Parsippany, New Jersey – collectively about 7.5 percent of the country’s office inventory.

Meanwhile, mall tenants are finding they can push for concessions for landlords desperate to keep their properties afloat. Aside from the cream of the crop, the traditional mall as we know it is fading from the American landscape. Strip mall owners, too, are having trouble attracting and retaining tenants. Though many landlords have tried to make up the difference in flexibility, the economic reality is that many of the properties will also become likely targets for developers.

I will not be surprised at all to see some old strip malls and office parks redeveloped into mixed-use communities, especially since they tend to be close to major transportation arteries. But if such conversions occur, who will live in these places?

Today’s young adults have followed the pattern of previous generations, piling into city centers for the culture, public transit and career opportunities that urban living affords. But as the oldest millennials start to have children and to consider homeownership, it will be interesting to see if and how these patterns shift. I am told that young adults who flocked to Brooklyn during the past decade are starting to consider living in places like Beacon, New York.

In fact, depending on who you ask, a variety of communities in New York’s Hudson Valley might be the new Brooklyn, including Beacon, Newburgh and others. This “X is the new Brooklyn” hype is so longstanding and so prevalent that local blogger Ivan Lajara made a joke of it all the way back in 2011. From the media coverage, becoming “just like Brooklyn” generally seems to mean a place has developed a crop of coffee shops, fancy bakeries, and cocktail or craft beer bars to cater to an influx of former Brooklynites. But this development does indicate that at least some young urban dwellers (though perhaps fewer than local officials would like you to think) are ready to leave the city behind. Beacon is a solid 90 minutes away from Grand Central Terminal, making it a very long commute for those holding on to jobs in Manhattan.

Places like Beacon may be more appealing now than they were in past years, but they are not actually Brooklyn and never will be (despite the coffee shops). That isn’t necessarily a bad thing. A lot of parents in my generation moved from places like Brooklyn to places like Westchester County to raise our kids. A lot of those kids grew up and moved back to Brooklyn.

But now that they are contemplating families, today’s young adults often find Westchester too crowded, too expensive or, usually, both. So some of them have drifted farther north. But many of them have discovered, as their parents did, that three or four hours of commuting each day isn’t terribly compatible with family life. This generation may have more latitude to rely on telecommuting part or full time, which could make a difference. But for everyone else, staying in a place like Beacon will depend on finding a good job closer to home.

In the end, any mixed-use developments built on the bones of former office parks will have to be populated by people who can either work from home or work nearby. The success of these developments will depend on the success of the economy surrounding them. Moderate-priced housing is going to require a lot of moderately well-paid jobs in the vicinity. Too much money will turn an area into an expensive market, just as has happened in Brooklyn and Westchester. Too little will not support new investment.

There is also another possibility. In the age of trendy, largely tech businesses creating campuses that regularly include amenities like laundry facilities, day care, gyms and dedicated spaces to nap, some development companies have experimented with turning old office parks into workspaces with modern amenities like fitness centers and food trucks, in hopes of convincing companies that they can successfully attract young adults to the suburbs. A mixed-use development that can first secure a strong, in-demand company as a tenant might fill its new housing and inject economic activity into the surrounding area. But the success of such a plan rests on convincing employers that talented workers are indeed willing to leave the big city.

In the final analysis, successful communities allow people to live reasonably near where they work. You need both jobs and housing. Successful repurposing of our overbuilt malls and office parks is going to depend on how well a particular region succeeds in attracting the jobs to support the housing.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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