Special Report
BASED ON PREVIOUS OFFICE-MARKET CYCLES, MANY INDUSTRY
observers expected the current space crunch in Manhattan to drive
tenants west across the Hudson River. While a few companies have
set up shop in the Garden State, experts say the New York vs. New
Jersey rivalry is a pretty lopsided contest—at least for now.
“Going by the current economy, I don’t think people are looking
to go there to save money,” says Marc Shapses, executive managing
director at Studley. “I think it’s more important to be able to stay in
Manhattan for the prestige and for the ability to find employees, keep
them and have a location where they’d rather be.”
He adds, however, “What’s happening now is that there are no
decent-sized blocks of, say, 100,000 sf available in a class A building Downtown, aside from 7 World Trade Center. Obviously over in
Jersey City you have some great qual-
By Paul Bubny ity space. It happens to also be a great value, but a lot of it’s in newer build-
ings.” Shapses says that “if the econo-
my turns,” Jersey City could stand to gain.
On the other hand, a “turn” that takes the form of downsizing in
the financial services sector could actually mitigate against the possibility of flight across the Hudson. “If some of the banks start putting
space on the market, that will create potential blocks” of available
space, Shapses says. “If they don’t put space on the market, then
Jersey City is still going to have a potential to gain some tenants
because then the pricing is going to be pretty significant.”
When the Downtown projects currently under way start coming
on line in a few years, “The pricing for the new space could easily be
in the $70s per sf and maybe higher,” Shapses says. “The pricing for
the Jersey City buildings is in the $30s per sf. So tenants are either
going to have to step down in quality and vintage of building or
they’re going to have to step up in price in order to stay Downtown.”
Jersey City enjoys a few competitive advantages, not least of which
is convenience—“It’s just a PATH train away from Downtown or
Midtown,” Shapses says. Further inland from the Hudson riverbank,
the appeal of quality office space in and of itself is more variable.
“With the New York City market so strong and with the differential in
rents and utility costs and build-out costs, and some of the incentives
from the state, you’re surprised not to see more movement from
somewhere in Midtown or Downtown over to the Meadowlands
area,” says Margaret Egan, vice president at ING Clarion. Egan oversees ING Clarion’s office properties in Manhattan as well as
Metropolitan Center, a 423,000-sf, 15-story tower in East Rutherford,
NJ that she says poses “significant leasing challenges.”
Those challenges, she says, are especially acute when it comes to
persuading Manhattan tenants to move a few miles west. “If you have
a business that’s already located in New York, how do you convince
employees to go all the way over to Jersey if they don’t already live
there? You’ve got to be able to get them over there quickly,” she says.
“Another concern is that if you have certain types of business and
certain types of requirements, are you going to be able to draw the
appropriate labor pool? New York is central; you draw from all
around you. In New Jersey, you’re going to be drawing from New
NvY N Js
THE CITY WINS—FOR NOW
Jersey, and are you comfortable with that labor pool? We think it’s a
great labor pool. But Merrill Lynch isn’t necessarily going to build
their headquarters over in the Meadowlands.”
With Metropolitan Center having undergone renovations in recent
years, Egan feels that the space itself is competitive. “I think it’s probably a transportation issue,” she says. “Our proximity from the city at
Metropolitan Center is seven miles. That’s 15 minutes on a good day,
but how often do you have a good day? We have a shuttle that goes
from our building to Secaucus Junction that gets people right into the
Port Authority Bus Terminal, but sometimes they want something a little more direct.”
Another issue for some Meadowlands properties may be “
proximity to services—retail, restaurants, things like that,” Egan says. “In
New York, you pop out of the office and you’re in the middle of
everything, and Jersey City is much more compact, much more
urban, so we come up against that as well.” She says the long-delayed completion of the Xanadu entertainment and retail complex,
also in East Rutherford, could eventually provide more options.
At Olnick Properties’ Headquarters Plaza complex in Morristown, NJ,
which includes three office towers and an office mall, there has been a
little more migration from Manhattan. “We have a Wall Street firm that
moved here in late summer or early fall, and they’re already taking
another floor that we having coming available,” says George Tockstein,
VP of the Olnick Organization’s commercial division, which co-owns
