Real Estate Expert Analysis to Inform Hopewell Township Planning on Scotch Road

Hopewell Township, in a special planning board meeting last night, continued the discussion about reimagining the Scotch Road / Merrill Lynch area master plan.

To recap, the property is currently zoned “Office Park” which permits a short list of acceptable developments but is primarily zoned for office space. The Township is considering, at the current property owner’s request, the revision due to the declined economic climate for office parks. Frank Banisch, Township Planner, explained at the last planning board meeting that Hopewell Township currently has 25 percent more office space than the market can support. Here is MercerMe’s article.

Offices Space or Beyond?

Jeffrey Otteau

To aid in this information gathering, Hopewell Township has retained Jeffrey Otteau of The Otteau Valuation Group, Inc., a real estate market trend analysis company based in East Brunswick, to provide an report to clarify the viable and realistic potential for current or future office development in the Scotch Road area.

Otteau presented an overview to the planning board of the real estate and economic climate in New Jersey that will inform his analysis. “Trends in office space are indicative of what is happening in the job market,” said Otteau.

He asserted that New Jersey is in “challenging times” no longer a result of the after-effects of recession, but instead a general changed economic circumstance in the state. The national economy has fully recovered from the recession, in terms of employment numbers, he said, yet New Jersey has only recouped one-third of the lost jobs. Moreover, between 2006-2012, nationally household incomes rose 6%, while New Jersey house incomes decreased 2%, said Otteau. And although 2013 showed some data that the market conditions for office space is no longer getting worse, New Jersey is filling office vacancies at a concerningly slow rate.

“It isn’t that we don’t want office space,” said Karen Murphy, planning board chair, “it is that we want to know whether [the Township] could support the office space and also our COAH obligations.”

(For a refresher on COAH check out MercerMe’s post about COAH basics and also the affordable housing Township meeting. Basically, under current proposed COAH regulations, Hopewell Township would face an obligation of accommodating nearly 1,500 affordable housing units by 2034.)

The quantity of existing office space in a 5-mile radius around the property is “staggering…[which] is a testament to the uniqueness of the property and the area but it also underlines the potential risks that if vacancies were to start to occur,” Otteau said. “There will be more to fill than other places.”

Beyond assessing office space viability, Otteau also will analyze current housing availability, population growth and household formation to provide recommendations and potential combinations for real estate and retail development in the area.

“We won’t be telling [the Township] how many [units] are needed but will tell how many the market will be able to absorb on their own without having to create a mixture of uses and how that number changes when retail and office is brought into the mix,” said Otteau.

The move of the “millennials.”

Office space and housing are inextricably linked and employers are generally driven by accommodating their younger fleet of employees, millennials (people between the ages of 25-34), viewing them as the future of their industries, Otteau said. And younger workers are often not able to afford the housing that exists in areas like Hopewell Township due to lower incomes, lack of developed and adequate credit and higher student debt. He noted that employers often want to fill office space in a geographic area where the housing alternatives provide for this demographic.

One planning board member asked about acceptable commuting distances, to which Otteau answered that individuals consider two main factors that boil down to “convenience:” 1) whether there is public transportation (and its cost) and 2) how long it will take to get to the destination.

Why did the chicken cross the road?

The property area being discussed flanks Scotch Rd on the East and West. To the East is the Merrill Lynch complex. To the West is undeveloped land and/or agriculture. The Township formed a sub-committee in preparation for this process to assess whether it was feasible to contain development on the East (Merrill Lynch side of the road) and reserve the West side as open space/agricultural uses.

Chip Erickson, from Sansome Pacific Properties, Inc. who represents many of the land owners in the Scotch Road area, stated that the property owners are willing to look at all the options being reviewed. Erickson also shared that the East side of Scotch Road, the side with Merrill Lynch, has many constraints including forest, gas line, wetlands, high tension power lines, and slope and ridge line issues.

Otteau’s report will not recommend siting locations. These are political, fiscal and planning decisions that involve the planning board, Township Committee and Township’s planner.

Potential Impact on School Enrollment:

Some local residents have expressed concern about the impact of potential residential development on the current under-enrollment in Hopewell Valley Regional School District (HVRSD), which has been seeing marked decline in enrollment numbers. The specific concern voiced is whether a high-unit residential development would increase the enrollment numbers so drastically that it would require additional measures, such as opening an additional school.

As a follow-up from the last Township planning board meeting, the Township has been in communication with HVRSD’s demographer, Richard Grip, to access the future densities and offer a hypothesis as to how many additional students HVRSD would have to absorb. Absent a specific housing break-down, Grip hypothesized impact on schools from the current 2,500 proposed units would be 650 students.

To this point, Thomas Smith, HVRSD Superintendent, provided requested feedback about school district capacity.

“Based on the 5-year projections, we anticipate the direct enrollment to be 3,151 in the 2018-2019 school year, down from a peak of 4,000 in 2008,” he said. “Should we hire,rehire staff and balance the student impact across our schools, we could again house students at previous levels. Per our demographer’s June 2014 report, the accuracy of projections longer than 5 years significantly decreases.”

Environmental / Community Character

Jim Waltman, Executive Director of the Stony Brook-Millstone Watershed, asked several questions at the meeting about the current approved office space square footage, information about any assessment about physical impact for the balance for office space including the associated parking, and developed vs. developable land. Many of those questions will be researched and answered at a later date. “The Watershed will be looking very carefully at how the Township protects the waterways,” said Waltman.

 What’s next?

We are told that the next meeting is July 16th during which Otteau will return with his report. It does not yet appear on the Township website.

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