On the waterfront

Priced out of Midtown and Wall Street, New York City,based businesses are crossing the Hudson River, leasing millions of square feet of new office space in buildings along New Jersey’s Gold Coast, the riverfront office corridor that includes Jersey City, Hoboken and Weehawken.

Priced out of Midtown and Wall Street, New York City,based businesses are crossing the Hudson River, leasing millions of square feet of new office space in buildings along New Jersey’s Gold Coast, the riverfront office corridor that includes Jersey City, Hoboken and Weehawken.

By Howard Rudnitsky
February 2001
Institutional Investor Magazine

During the past 20 months, reports office broker Insignia/ESG, the New Jersey waterfront has absorbed some 4.5 million square feet of office space, mostly from financial companies in search of large, less expensive sites for their back-office operations. Rents there can run 35 to 50 percent lower than their Manhattan equivalents. But it’s not just the back offices of financial service providers that are moving. Pharmaceuticals company Forest Laboratories is already on the scene, and publisher John Wiley & Sons will be moving in soon.

Although the New York City office property market seems to be softening a bit , developers are skittish about a possible recession , the commercial vacancy rate is still just 5 percent, down from 13.6 percent in 1996, and reasonably priced prime space is hard to find. For that reason, companies have broadened their horizons to include Jersey’s Gold Coast, which offers invaluable proximity to Manhattan. Says Insignia/ESG,s executive managing director Robert Rubin, “Many people see the Jersey City and Hoboken waterfronts as the sixth borough of New York City.”

Chase Manhattan Bank, for example, will lease 1.2 million square feet at two of Lefrak Organization,s Newport Offices buildings in Jersey City when they are completed in 2002. John Wiley last summer committed to moving its 800 employees from its New York headquarters on Third Avenue to Hoboken, where they will occupy a third of the 1.1 million-square-foot Waterfront Corporate Center that is being developed by Parsippany, New Jersey,based SJP Properties. The developer broke ground in December.

Mack-Cali Realty Corp., a Cranford, New Jersey,based real estate investment trust, recently announced that it will build two new office towers at its Harborside Financial Center in Jersey City, totaling 1.5 million square feet at a cost of $400 million. Discount brokerage Charles Schwab & Co. signed a 15-year lease for 575,000 square feet in one of the buildings, which should open early in 2002.

When Lefrak last fall announced plans to break ground on a 32-story, 1.1 million-square-foot office building at the Newport Office Center, the developer had no large anchor lease in hand. With equal confidence, Secaucus, New Jersey,based Hartz Mountain Industries plans to build two huge office towers: a 1.1 million-square-foot building at the Colgate Center in Jersey City and a 1.2 million-square-foot office complex at Lincoln Harbor in Weehawken.

To encourage construction and bolster lagging local economies, the state legislature has designated several cities along the Hudson waterfront as an urban enterprise zone. Developers can stabilize their real estate taxes at a fixed rate, a relatively small percentage of construction costs over a period of 15 to 20 years. The program also offers up to $500 in corporate tax credits per eligible employee.

Another lure is the state’s business employment incentive program, which helps companies that move to New Jersey attract higher-skilled workers. Says Mitchell Hersh, CEO of Mack-Cali Realty, “BEIP provides tax benefits and rebates to midlevel management salaries and above, which turns out to be a substantial benefit to employers.” Hersh asserts that a company can get back up to 80 percent of the income taxes that its employees would have paid to the state over ten years.

Joining the Gold Coast crowd sometime in 2004 will be the asset management group and employee training division of Goldman, Sachs & Co., which plans to move from New York City to Hartz Mountain’s Colgate Center, occupying about 2 million square feet of space.

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