Alexander Anderson Real Estate Group’s incubator space in Pompton Lakes. – (ALEXANDER ANDERSON REAL ESTATE GROUP)
For Eric Anderson, the CEO of Alexander Anderson Real Estate Group, there is an unmet demand for affordable space for entrepreneurs.
“There is a shortage of opportunity for small businesses, and there’s a shortage of opportunity for businesses that are looking to expand that aren’t ready to commit to long-term leasing strategies because they don’t know what their market is going to be,” he said. “They don’t want to short-change themselves by entering a smaller lease.”
Marketing properties as incubator spaces, such as 200 Wanaque Ave. in Pompton Lakes, gives landlords the opportunity to begin to meet that unmet demand with plenty of flexibility to its tenants, according to Anderson.
“Because the leases are much shorter term, we can slowly bump things up as the space gets more popular,” Eric Anderson said. “We’ve done smaller incubator-type spaces in Hackensack and Jersey City, very small-scale, and in those, where there is less space, we can actually turn a higher dollar return for the owner. In this case, it was just so big that we had to go out on a lower basis.”
The property is a 30,000-square-foot Class B office building in an area with a 12.3 percent vacancy rate. And in the three months Alexander Anderson has marketed the property, Mary Kay Cosmetics, Kubisys and Prime Time Toys have leased about a third, 10,000 square feet.
“We took a business incubator space that we didn’t know what direction, like a tech incubator or a small business incubator or a party-type incubator, and now we have two new clients that are going to be entertainment-related,” Anderson said. “Maybe that will lead to more kids-type incubator option spaces there.”
Having tenants like Mary Kay Cosmetics at the property, according to Anderson, is also beneficial in that it gives the property exposure to individuals who may require office space for their own business.
“What’s great about Mary Kay is that it brings a lot of entrepreneurial-spirited people because most of the Mary Kay people, at least from my understanding, do multiple businesses, so that opens us up to other tenants in that area,” He said.
The company said it hopes to have 60 percent of the space leased by September, but it recognizes that full occupancy may not be achieved because of the nature of the space, where tenants may be constantly moving.
A conference room at the Pompton Lakes incubator space. – (ALEXANDER ANDERSON REAL ESTATE GROUP)
Tenants at Pompton Lakes are able to lease 525 to 6,000 square feet. Amenities for the spaces include an exterior lounge, a data center and a shared conference room.
But while Anderson thinks marketing available properties as incubator spaces can be a solution for landlords in areas with slow markets, he also acknowledge that this may not be a solution that works everywhere or for every property.
“In New York City, you can do a lot bigger space,” He said. “It may take time to fill up, but it will definitely fill up, whereas Hudson or Bergen counties, or Essex or Passaic, it really depends on the business environment in those areas. I think Hudson, let’s say, Jersey City or Hackensack, it will probably do better.
“It’s based on population and the environment the building is in. If you’re out in Sparta, it’s not going to work. You have to have people around.”
Following its success in both Hackensack and Jersey City, the firm is considering whether to market 4,200 square feet in Newark as incubator space.
“One of the nice things about incubator spaces, it’s kind of like a farm for new tenants,” Anderson said. “We’re cultivating relationships with tenants and new relationships that are, hopefully, going to grow and spring into bigger projects and feed off of each other, and look for bigger and better spaces. Hopefully, we’ll be the ones helping them to go in that direction.”