Vacancies still higher than city
By ERIC HERMANN
Daily News Business Writer
February 25, 2002
After Sept. 11, many Manhattan-based companies looked across the Hudson
and saw the Promised Land.
New Jersey offered a quick solution to companies that had been in the World
Trade Center or in damaged nearby buildings. In rapid succession, firms like
Morgan Stanley and American Express shifted jobs to towns like Jersey City,
Parsippany and Short Hills. Some companies already had Jersey facilities.
Others signed new leases, security fears driving them to disperse their
To date, displaced downtown firms have shipped an estimated 16,500 jobs from
Manhattan to New Jersey since Sept. 11, according to the real estate firm
Tenantwise. More will follow.
Last month, Goldman Sachs announced plans to move its entire stock trading
department to a new 2.4-million-square-foot complex in Jersey City.
Insurance brokerage Marsh & McLennan just signed a lease in Hoboken, where
it will move at least 1,200 jobs.
Companies want to disperse operations, but also are attracted by Jersey's
lower rents and financial incentives widely considered better than New York
"When you take all those things and compare it to midtown, it's a much more
attractive transaction," said Kenneth Rapp of CB Richard Ellis.
But the office market of northern and central New Jersey — except for the
Jersey City waterfront — is languishing. Despite post-Sept. 11 demand,
vacancy rates remain higher than in Manhattan, even downtown. The slowing
economy, corporate layoffs and an excess of sublease space have taken an
even heavier toll across the Hudson.
"The New Jersey market is weak," said David Shulman, a real estate analyst
at Lehman Brothers.
"The demand has fallen off in the market," added Mitchell Hersh, chief
executive of Mack-Cali Realty, one of the state's largest commercial
developers. "It's mostly about job contraction and reduction."
New Jersey has a diverse supply of office buildings, from the gleaming new
structures of Jersey City, to bygone-era buildings of downtown Newark, to
suburban corporate campuses extending from Parsipanny to Princeton. With 137
million square feet of office space, northern and central New Jersey is the
nation's ninth largest market, according to Grubb & Ellis. Manhattan, the
largest, is nearly three times bigger, with about 380 million square feet.
Yet at the end of last year, Jersey had a vacancy rate of 17.52%, up from
12.23% a year earlier, according to Insignia/ESG. Vacancies increased last
month, rising to 17.86%, the firm said. Downtown Manhattan, by contrast, has
an availability rate of 13.4%. Overall, 11.2% of Manhattan's office space is
currently available for leasing, according to Insignia/ESG.
Completed offices in the most desired waterfront areas of New Jersey are
almost fully occupied, with just 4.5% available, according to Grubb & Ellis.
Including projects under construction, the availability rate rises to
17.37%, according to Insignia/ESG, pointing to high vacancies soon.
Brokers and real estate executives point out that, despite a brief surge in
demand after Sept. 11, companies reducing workforces need less space. As a
result, a decision by Manhattan-based companies to move some or all of their
operations across the river "didn't translate into an equal requirement for
space in New Jersey," said Steve Jenco of Grubb & Ellis.
The result is that new leases signed in Jersey have been dwarfed by the
amount of space dumped on the market for sublease. Knight Securities is
trying to sublet 260,000 square feet at the Newport complex in Jersey City.
Further inland in Somerset County, AT&T put its entire seven-building, 2.6
million-square-foot campus on the market.
Other hard-hit New Jersey companies, including Lucent, have also dumped
space on the market. At Harborside in Jersey City, Charles Schwab is
subletting all of Plaza X, which isn't even finished yet.
"We've almost tripled the amount of sublease space just in a one-year time
period," Jenco said.
For that reason, New Jersey real estate executives say the state is
well-positioned to absorb demand if more companies try to spread out
As last year's report by Sen. Charles Schumer (D-N.Y.) pointed out,
construction of new buildings in Brooklyn and Queens has lagged, making it
hard for firms to move staff there.
As a result, brokers report continued interest on the other side of the
"A number of major tenants from downtown and midtown are still looking at
the waterfront," said Patrick Murphy of Insignia/ESG.
Original Publication Date: 02/08/02
© 2002 Daily News, L.P.