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Hudson waterfront gives New York City run for its tenants

Brokers: Lower Manhattan development won't overshadow N.J. markets

By late 2013, One World Trade Center is expected to rise above Lower Manhattan to become the tallest building in the country. But New Jersey real estate experts say the office market across the Hudson River is strong enough to cast a shadow of its own.

By late 2013, One World Trade Center is expected to rise above Lower Manhattan to become the tallest building in the country. But New Jersey real estate experts say the office market across the Hudson River is strong enough to cast a shadow of its own.

With vacancy rates at their lowest in a decade, the Hudson waterfront continues to be one of New Jersey’s most robust submarkets for office space. And the rebirth of Lower Manhattan will do little to change that in 2012, according to insiders who say Jersey City and Hoboken will continue to lack nothing in appeal.

“I don’t see the tide going back out toward New York,” said David Stifelman, executive director of the real estate services firm Cushman & Wakefield. From a real estate perspective, he said, it costs a firm about 40 percent less to operate in Hudson County than in Manhattan when factoring in expenses such as taxes, rent and utility costs.

But the Hudson waterfront will continue to draw strength from its vibrant infrastructure and the growing array of government incentives offered to companies that operate in the Garden State, Stifelman said.

Those benefits were not lost on Fluitec International, a Belgium-based clean-energy company that recently picked Jersey City to consolidate its U.S. operations from offices in Summit, Atlanta and Tampa, and open its new global corporate headquarters. Fluitec Director of Business Development, Amar Pradhan, said incentives and transportation options were among the deciding factors in the startup’s decision.

“The business approach to it is that it is a hub, and it’s easy to get to,” Pradhan said. “We definitely have a lot of younger urban people … who appreciate being in a place where they can have flexibility in where they want to live.”

The firm has operated temporarily at the Harborside Financial Plaza 5 building in the city since being awarded a Business Employment Incentive Program grant worth nearly $1 million by the state Economic Development Authority. It will soon move to a nearby converted industrial building at 333 Washington St., about two blocks inland.

Fidelity expects employees to begin filling the Newport Office Center in the second quarter of 2012. The financial firm picked the Jersey City site because it provides access to public transportation, shopping and dining, hotels and recreational facilities for staff, said Fidelity spokeswoman Jennifer Engle.

“Newport is an attractive real estate market, and the location we’ve chosen can accommodate our current need for office space while allowing room for future growth,” Engle said.

Fidelity’s move was the waterfront’s largest new lease this year through the third quarter. After Fidelity, the next largest were Citigroup and Jefferies & Co., which signed new leases of 84,270 and 62,763 square feet, respectively.

Lower Manhattan is still filling space. One World Trade Center, meanwhile, is about one-third leased after the Port Authority in May signed a 1-million-square-foot deal with publishing giant Conde Nast. The 101-floor tower will be joined at the site by four other new skyscrapers and the rebuilt 7 World Trade Center, which opened in 2006 and is about 90 percent leased, according to its owner, Silverstein Properties.

But the redevelopment of Lower Manhattan does not mean competition for the Hudson waterfront, said Jeffrey Schotz, executive vice president of leasing and marketing for SJP Properties, which owns 95 Green St., in Jersey City, and Waterfront Corporate Center I & II, in Hoboken. The submarkets “are two separate worlds” that attract two different types of tenants, he said, noting that a company like Conde Nast never considered Hudson County for its enormous space needs.

The exceptions are when companies look to divide their operations between the two markets or simply move part of their work force to a smaller, more modern space because they can’t find an attractive option in Manhattan, where the average age of an office building is around 65 years old, Schotz said. “Some of these larger users who are spread out all over the city are looking to consolidate, but they’re also looking for infrastructure that can also support them,” he said.

The demand for leases of 100,000 and 200,000 square feet, combined with shrinking vacancy rates, is also fueling new construction on the Hudson waterfront, he said. SJP is currently building Waterfront Corporate Center III, in Hoboken, a 520,000-square-foot building that could house Pearson Inc. The textbook publisher in September was awarded an $82.5 million Urban Transit Hub tax credit, which would allow it to move some 600 employees to the SJP building from its headquarters in Bergen County.

And while the financial sector has typically dominated the waterfront market, Jersey City is now seeing diversification, said Rosemary McFadden, the city’s chief of staff and economic development expert. The city is now hearing from manufacturing, pharmaceutical and technology firms like Fluitec, she said.

“We’re pleased because the rents are holding up and the vacancy is down,” McFadden said. “And I think when organizations and businesses take a look at the cost of doing business in Jersey City, relative to Manhattan, they realize they’re still getting a tremendous bargain.”

E-mail to: jburd@njbiz.com
On Twitter: @JoshBurdNJ

Joshua Burd

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