“Empty Shells” – Vacant corporate offices cast a long dark shadow over NJ’s economy and local budgets.

Name: McKirdy & Riskin, P.A.
Address: 136 South Street, Morristown, NJ, 07850
Telephone: 973-539-8900

Home » Property Tax Appeal » “Empty Shells” – Vacant corporate offices cast a long dark shadow over NJ’s economy and local budgets.

by: Anthony F. Della Pelle

16 Oct 2012

A featured article in the Sunday Star Ledger, Empty Shells, Abandoned Corporate Offices Leave Huge Economic Void in N.J. reviews the impact that corporate downsizing is having on Main Street in New Jersey. From Merck in Whitehouse Station (Readington Township) in Hunterdon County to Bell Labs in Holmdel in Monmouth County, large corporate office closures result not only in lost or relocated jobs, but the collateral damage includes lost revenues for the small businesses that rely on the corporate presence.

These closures and relocations also cause a more direct hit to the local tax property base as the owners of the empty shells have difficulty in leasing them out or selling them. This provides owners stronger evidence of diminished value when pursuing tax appeals. The Star Ledger article quotes the Mount Olive tax assessor discussing the impact of the 2004 closure of the BASF headquarters in that community, where BASF represented 10% of the Township’s ratable base. Previously the complex was valued at $27.6 million and paid $4.5 million in local property taxes. Today, the property is assessed for $19 million with a tax bill of less than $1 million.

The impact of Merck’s departure from Whitehouse Station over the next two years could have a similar impact as the company contributes $5 million to local, school and county taxes. When the relocation of its headquarters staff is complete, more than one thousand employees will be gone and 1 million square feet of office space will be vacant. In addition to downsizing operations in Whitehouse Station, Merck had acquired a nearly 400,000 sf office building in Roseland as part of its acquisition of Organon in 2011. Since then however, the Roseland property, assessed for over $80 million, has been vacant and was recently sold for $18.1 million. As a result of successful tax appeals, the taxes on the Roseland property have been reduced by more than $600,000 annually.

As companies continue to downsize and close operations, the local economy suffers. Other small businesses may see their revenues drop or worse still, their doors close. Another detrimental effect these office closures and relocations may have is on property values overall. When large employers leave an area, it may become more difficult to sell or lease other properties in the area causing downward pressure on property values. This could result in a domino effect of declining property values, which may lead to more tax appeals, reduced assessments and an even lower tax base.