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Sounding alarm in Jersey City as banking sector’s footprint starts to shrink

Experts say other industries must enter Jersey City as the banking sector contracts.-(AARON HOUSTON)

It’s been four years since Depository Trust & Clearing Corp. unveiled plans to move 1,600 employees to Jersey City.

But by the time those first staffers crossed the Hudson, in December, they found an office market heading toward a crossroad.

The banking firms that helped build Wall Street West are shrinking their footprints as their leases expire, and insiders say new industries will have to fill the large blocks of space these tenants are leaving on the waterfront.

“Jersey City became almost too concentrated in one industry group,” said Gil Medina, an executive vice president with CBRE, in Saddle Brook. “And when that industry group needed to adjust its headcount, it affected Jersey City disproportionately.”

Vacancy in the waterfront submarket is 10 percent, according to data from Cushman & Wakefield. That’s still among the lowest rates statewide — and only half the overall market average — but experts said its recent performance is raising eyebrows. Leasing activity through the second quarter has barely exceeded 200,000 square feet, down 50 percent from midyear 2012.

But Medina and other experts are far from sounding the alarm for office hubs on New Jersey’s Gold Coast, such as Hoboken and Weehawken. The markets are still rich in amenities and transportation infrastructure — not to mention newer and cheaper stock than Manhattan — and there are early signs that sectors such as technology, media and publishing can fill the void left by the banking industry.

A high-profile deal completed last year is perhaps one example. In Hoboken, Pearson Education preleased about 40 percent of a 520,000-square-foot tower being built by SJP Properties. The textbook publisher will anchor the third phase of SJP’s Waterfront Corporate Center, which has housed both publishing and financial services firms for more than a decade.

Brokers also point to growth in other sectors along the waterfront, thanks to many smaller and midsized deals. Computer and technology firms took nearly 340,000 square feet from 2010 through the second quarter this year — triple the total from 2006 through 2009, according to Cushman & Wakefield. Among them: Scivantage and AvePoint Inc., software firms that lease 42,000 and 35,000 square feet in Jersey City, respectively.

Jeffrey Schotz, SJP’s executive vice president for leasing and marketing, said he expects the new industries “to be the driver of the market going forward.” And they won’t see the waterfront as simply back-office space — as it often was for the financial sector.
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“It’s not just overflow,” Schotz said. “It’s the ability to take groups of people and move them out into new real estate that is much more functional and much more productive — and less expensive to operate — than the offices in New York.”

Like many other owners, SJP also is marketing space that’s been shed by a banking firm. Earlier this year, Merrill Lynch vacated two floors at 95 Greene St., in Jersey City, which Schotz said is drawing interest.

Joshua Burd

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