A cornerstone of Westfield's downtown redevelopment plan is to build a 200,000 SF Class A office building on the South Avenue train station parking lot. On the Town of Westfield's One Westfield Place FAQ page, questions 6 - 10 address address the South Ave office building and the Lord & Taylor office space. Question 6 succinctly asks: Will there be tenant demand for 300K square feet of office space given changes in workforce patterns? What assurances do we have that the office buildings will be leased?
The answer is brief and unsatisfying. This past week, HBC’s development company StreetWorksDev had a meeting to explain the rationale behind the office project.
To understand why this project will either succeed or fail, it is important to understand three things. 1) How are corporate real estate teams using office space to attract and retain top talent? 2) Has demand for Class A space returned to pre-pandemic levels? 3) Why are the project’s supporters so confident the space will be leased.
1. How are corporate real estate teams using office space to attract and retain top talent?
The 2022-2023 CBRE Global Workplace & Occupancy Insights report analyzes data from 60 organizations who collectively occupy 493 million SF. Several themes emerged from the study. Purpose-driven flexibility office management recognizes that employees expect their work environment to offer physical and virtual spaces to comfortably collaborate and build connections with their colleagues. Hybrid Work combines working in an office and working remote.
Progressive companies want a flexible office portfolio. When their business grows or slows, along with their headcount, the office space should be able to accommodate the change.
2. Has demand for Class A space returned to pre-pandemic levels?
Almost. Leasing demand is just 5% behind 2019. During the third quarter of 2022, 1.32 million SF of office space was leased and this was the fourth consecutive quarter of over one million square feet. Year-to-date leasing totaled over 4.36 million SF and lease renewals increased 56% over 2022 Q2.
3. Why are the project’s supporters so confident the space will be leased?
On December 8th, HBC/Streetworks held a community meeting to discuss the office component of the project. Here is why they are confident about the market.
1) Quality corporate tenants have been migrating from office parks to suburban markets.
2) Most of the Class A office buildings are outdated and do not meet the needs of today's corporate users. New construction is more appealing.
3) Tenants are drawn to buildings near train stations.
4) Westfield would appeal to tenants who want to walk to amenities such as restaurants, coffee shops, bars, and retail.
5) The planned 200,000 SF “mass timber” office building on South Avenue would attract state and national attention. Mass timber construction is a wood product that is strong and is a low-carbon alternative to concrete and steel. It will be the first in New Jersey.
6) HBC will not begin construction until they have leased at least 50% of one building.