"If you look at [Jersey City’s] performance in the down market, when we hit the bottom of the recession here in 1991 and 1992, the city still absorbed about 800,000 sf every year," he says. "It flourished in that environment," Rizk notes, "and that’s why we’re very optimistic about Jersey City."
Another member of the Insignia/ESG team—Martha Burton, managing director of that firm’s Wall Street office — adds her observation that "lower land and construction costs enable developers to deliver new space for about $20 psf less in Jersey City than in Manhattan. And the cost reduction does not include various city and state tax incentives." As she reminds: "The state’s Business Employment Incentive Program provides grants—based on the number of jobs a company creates—that amount to 10% - 80% of the state income taxes withheld over a period of 10 years."
Yet another dollar advantage Burton cites is that of utility costs, which she says come to "about $1.25 psf—probably $1 psf less than [in] New York."
Artist's rendering of American Financial Exchange, with its 1.8 million sf of space and floor sizes ranging up to 120,000 sf designed to accommodate large space-users.
Nor does Jersey City have a commercial rent tax of 6%. Additionally, because it is designated UrbanLTrban Enterprise Zone, corporate income taxes are lowered from 19.2% to 9.5% and state sales taxes on the equipment companies buy to set up their operations is 3%—half the normal rate. As Burton points out: "The Urban Enterprise Zone designation is precisely why Merrill Lynch originally came out to Jersey City."
Meanwhile, Nelson says Insignia/ESG is finding the combination of tax incentives and amenities such as good mass transit to he a big draw. In addition to the PATH, the ear tunnels, the light rail being built along the Hudson waterfront and ferry service to Downtown Manhattan, a new high-speed ferry began cruising to 38th Street last spring. "We’re finding that people are seriously looking for major facilities that are not just back-office anymore," Nelson claims. "This is about consolidating groups of people who are executives.
"In fact," she continues, "it’s about the whole area; about having a lifestyle and having a hotel. If a tenant does not have to be in Manhattan, there’s talk of moving the company out of New York City and leaving a small component behind. [Keep in mind] we still have not officially put our building on the market, yet as early as last year we were receiving requests for proposals for substantial amounts of space; RFPs from major tenants looking for anywhere from 400,000 sf - 800,000 sf. Available blocks of space that big simply do not exist now on the Hudson waterfront, where the vacancy rate of 3% - 5% is the lowest in the state."
Then there is the opinion voiced by Mark Ravesloot, formerly with Jones Lang Wootton (where he represented Harborside) but now with Insignia/ESG as a senior managing director.
"There is a component of back-office at Harborside," Ravesloot admits, "but those were the earlier tenants. Today, we’re seeing more front-office operations and support facilities that are looking for better infrastructure and the overall lower cost of doing business in New Jersey. Of course," he continues, "an important component for both front- and back-office is state tax incentives which, for some tenants, can mean anywhere from 20% 80% of their rent."
As a case in point, recent merger activity by one of the site’s tenants put 380,000 sf at Harborside on the market. however, there are already commitments in-place for 160,000 sf of that availability, and the final stages of signing tenants for the remaining space is reportedly at hand. As Ravesloot points out: "We have enough proposals on that space to lease it several times over. As such, we’re comfortable we will get that done over the course of the next several months."
(It bears noting that Harborside’s current tenant list includes: Bankers Trust, with approximately 400,000 sf; Morgan Stanley Dean Witter, which recently expanded to more than 400,000 sf; The American Institute of CPAs, comprising 260,000 sf; and the Bank of Tokyo, with 145,000 sf. In fact, one of the recent leases at Harborside was an 85,000-sf expansion by Morgan Stanley Dean Witter.)
And while it may well be part of the job description of real estate brokers to be optimistic, those handling Mack-Cali’s Harborside and American Financial Exchange say there are solid reasons to believe Jersey City is ready to fulfill the dream portrayed in artists’ renderings of a waterfront that stands on its own. "Anytime we work with a large tenant from New York City now, there is definite interest in the Jersey City waterfront," allows Carol Nelson, the Insignia/ESG executive vice president leading the team of brokers for AFE. "Years ago, this was simply not the case."
In addition, Nelson says the flexibility of AFE’s floorplates, given their capacity to be expanded to 120,000 sf with virtually unlimited ceiling height (allowing accommodativeness a trading floor, for example), makes it attractive to large users. Additionally, it’s pointed out that the AFE site has the flexibility of being broken down to two smaller buildings if it’s felt the change would better accommodate tenants’ needs.
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