By Keiko Morris
Jersey City isn't the fashion industry's new Garment District or
Midtown South, the hot spot for technology and advertising
firms.
But New Jersey's second-largest city has been making the case
that it is an up-and-comer in the office-space market, attracting
clothiers and publishers as well as building on its base of
financial-services companies.
The growing diversification, taking place at Jersey City's
waterfront, is being attributed by real-estate experts and
landlords to a combination of factors: New York City's rising
rents, generous state incentives and the booming residential
development in that area.
In just the past several months, apparel company Charles Komar
& Sons Inc. signed a lease to move its offices and showroom
from three sites in Manhattan after receiving a 10-year, $37.2
million economic-development tax grant from New Jersey. Also
receiving 10-year state incentive packages last year were Forbes
Media LLC for $27.1 million and VF Sportswear Inc. and its
subsidiaries for $13.1 million.
As for leasing more space to the financial sector, Jersey City
landed J.P. Morgan Chase & Co. and RBC Capital Markets last
year as well with the help of $303.6 million in state tax credits
over a decade. J.P. Morgan, which already had operations in the
city, has promised to create 1,000 jobs and RBC already has begun
to move some of about 900 positions.
In 2013, New Jersey merged its economic-incentive programs and
has aggressively used tax credits to bring and retain jobs, and
spur development.
Since then, the state has announced more than $430 million in
tax grants, which will be awarded over time, to attract and keep
companies in Jersey City. Those incentives are expected to bring
more than 3,000 jobs.
"In 2000, when you had the first big wave of office occupancy
coming to Jersey City, a lot of that occupancy was financial
services, broadly speaking," said Harrison LeFrak, vice chairman
and principal of LeFrak, which developed and owns much of the
Jersey City waterfront megadevelopment of residential towers,
offices and retail space called Newport. "Today, it is becoming
very financial technology-focused and we are starting to see retail
and apparel companies."
Attracting different kinds of sectors is making the Hudson
waterfront even more of a bright spot in New Jersey's otherwise
weak office market. More suburban areas have been weighed down by
older office parks that once were home to pharmaceutical and
telecommunication companies.
The state's overall average asking rent in 2014's fourth quarter
was $24.78 a square foot and its availability rate, which includes
vacancies and space that will become available in the next 12
months, was 24%, according to Newmark Grubb Knight Frank.
For the Hudson waterfront, which includes Jersey City's
waterfront, the average asking rent was $29.97 a square foot and
the availability rate was 15.8%. Manhattan's average asking rent
was $65.43 a square foot and its availability rate was 10.7%.
"We are in phase one of activity and most of the activity that's
coming are people moving from outside to Jersey City," said Peter
Turchin, vice chairman at CBRE Group Inc. "If it continues on, it's
a process similar to what happened in [Manhattan's] Midtown South
three to four years ago and happened Downtown this year."
New housing is another factor that commercial landlords are
attributing to the growing variety of their tenants. They are
hoping that the apartments being built on the waterfront will
create more vibrant streetscapes and draw even more companies.
Aiding that growth, the city offers property-tax abatements for
both new commercial and residential developments.
The residential units, the landlords said, should attract more
shops and restaurants, making the waterfront a place to both live
and work.
Today, 6,800 units are under construction throughout the city
and another 18,000 have been approved by Jersey City, said Mayor
Steven Fulop.
The waterfront "has changed dramatically in the last two to
three years and in the next five years it will change more
dramatically," Mr. Fulop said. "As Manhattan becomes more
expensive, you are going to see [the area] become more of a 24-7
community."
To appeal to the influx of young professionals, an increasing
number of commercial owners are renovating their properties.
Onyx Equities and Rubenstein Partners, for instance, are
investing $20 million to renovate their 320,000 square-foot office
building at 30 Montgomery St., creating two levels of retail
space.
"One out of every four tenants we show the [office] space is
technology centric," said John Saraceno Jr., managing principal of
Onyx Equities LLC.
Mack-Cali Realty Corp. is both updating its office properties
and investing in residential projects to insulate itself more from
New Jersey's stagnant suburban office market.
The publicly held real estate investment trust is spending $15
million to revamp its Harborside office complex in Jersey City as
well as developing a trio of rental apartment towers directly
behind Harborside at a cost of $320 million. The 1.9 million-square
foot office complex has about 500,000 square feet vacant.
Mack-Cali plans to add a beer garden, turn the food court into
something similar to Chelsea Market and transform its atrium into a
"cool" spot for employees to work or socialize, said Chief
Executive Mitchell Hersh.
"What we're doing in here is we want to create an edgy
environment that has a lot of appeal to younger professionals," Mr.
Hersh said.
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