Suburban NJ office value drops by 72% in a decade

What’s a suburban office worth these days? A lot less than it used to be, at least in the case of one Class A office building in Basking Ridge, New Jersey.

The value of the 135,000-square-foot building at 120 Mountain View Boulevard dropped 72 percent over the last decade, according to Morningstar. The four-story property was appraised at $7.7 million in July, down from $27 million in 2014.

The building’s troubles go back even further. In 2008, a real estate investment trust linked to KBS Realty Advisors bought the property for $30 million. Despite numerous improvements and 100 percent occupancy, it traded for only $27 million in 2014, according to a KBS report.

The building was 47 percent occupied as of December, per Morningstar.

An entity tied to a Henderson, Nevada-based investment management firm was the buyer in 2014, according to property records. The Nevada firm, Quarry Capital, did not respond to a request for comment. A representative who answered the phone at Quarry said the company did not own the property but was connected to it.

It’s possible that the lender took back the keys. Morningstar servicer commentary said “it appears that the borrower is amenable to the appointment of a receiver and is also willing to turn the property over to the lender.”

The borrower defaulted on the loan and the 2001 building was transferred to special servicing in July, per Morningstar.

Like elsewhere, office occupancy levels have dropped in Northern New Jersey since 2020 and the vacancy rate is hovering around 20 percent, according to a Newmark report. The average asking rent was around $31 per square foot in the second quarter, basically unchanged from the previous year.

It’s another story in Jersey City, where the market for Class A office appears to be thriving. 601W Companies recently bought the Harborside 5 Class A office building for $85 million from Veris Residential, adding to its vast portfolio in Harborside.