By Antonio Olivo
Feb. 25, 2003
Jersey City, New Jersey, Feb. 25 (Bloomberg) -- Merrill Lynch & Co. has
the land and the architectural designs to build a 38- story tower across the
Hudson River from New York's financial district. What it doesn't have is a
need for the building.
Merrill's 1.8 acres, purchased for $19 million, now serve as a parking lot
for some of its 3,100 employees in Jersey City, New Jersey. The firm has
eliminated 21,700 jobs since October 2000, when it submitted sketches of the
tower to Jersey City officials, and has shelved plans to build.
A three-year plunge in U.S. stock markets and the loss of 75,400 securities
industry jobs is reversing Jersey City's growth as an extension of Wall
Street. A surge in relocations after the Sept. 11 attacks has ended and the
city's office vacancy rate has tripled to 16.5 percent since 2000. Companies
such as Goldman Sachs Group, Inc. and American Express Co. have retreated to
Manhattan or scaled back plans to expand.
``Nobody is zooming over the river to come here,'' said Daniel Frohwirth,
director of real estate and marketing for the Jersey City Economic
Development Corp., an agency that seeks to bring business to the state's
second-largest city. ``If the economy hadn't dropped dead, we'd have cranes
all over the place.''
Wall Street job cuts in the past two years reduced the demand for office
space even at costs that are almost a quarter less than in Lower Manhattan,
according to rent data from Grubb & Ellis Co., which conducts real estate
Along Jersey City's waterfront, where office buildings replaced closed
factories and abandoned warehouses, rents averaged $28.67 a square foot in
the fourth quarter of 2002, compared with $37.33 in Lower Manhattan and
$51.43 in midtown Manhattan.
Before Merrill cut its staff 30 percent, senior vice president for corporate
real estate Michael Cowan said the company might place as many as 7,000 jobs
in Jersey City. The design for the 1 million-square-foot tower included
three trading floors. Merrill is a passive, minority investor in Bloomberg
LP, the parent of Bloomberg News.
``We purchased 99 Hudson Street with the idea that it could be useful for
future development,'' said Merrill spokesman Joseph Cohen, adding that the
firm never set a timetable for construction. ``Over the intermediate term,
it was intended as a parking facility and it is serving that purpose.''
The securities industry slump has put on hold 11.5 million square feet of
proposed commercial projects that city officials had counted on to boost
retail and housing development in low- income neighborhoods.
``If there was no financial problem in the nation, we'd be going great,''
said Mayor Glenn Cunningham, a Democrat who took office in 2001.
Amid the slowdown, Governor James McGreevey has ended a state program that
since 1996 lured businesses to Jersey City with $356 million in grants, tax
reductions and electric power discounts. McGreevey, a Democrat, withdrew
funding to help close a $5 billion state budget gap.
``The lack of those high-end jobs and state dollars could affect the future
of economic development,'' said Yaffa Rattner, who monitors Jersey City's
fiscal health for Moody's Investors Service.
Moody's has rated the city's debt Baa3, the lowest investment grade, since
February 2002, with a negative outlook. In December, the unemployment rate
in the city of 240,000 was 8.8 percent, up from 6.5 percent in December
2001, its low for the past decade.
As U.S. securities employment rose by almost 90 percent from 1989 to 2000,
Wall Street companies expanded in New York City's suburbs, with the largest
concentration going to Jersey City, a five-minute train ride from the World
Trade Center. The rail connection, severed by the Sept. 11 terrorist attack,
is due to be restored in December.
Glass and steel towers reshaped a skyline once dominated by the
Colgate-Palmolive Co.'s 55-foot clock -- a relic of a manufacturing past
when Colgate toothpaste, Emerson radios and Dixon Ticonderoga pencils were
By 2001, the securities workforce in New Jersey increased to 52,100 from
24,200. Most of the jobs went to Jersey City. Emergency relocations after
Sept. 11 brought more analysts, traders, brokers and support personnel.
Employment peaked at 61,400 last April, and then dropped to 48,400 by in
``Somewhere around April or May of last year, we saw the bulk of those jobs
go back to New York,'' state labor department spokesman Kevin Smith said.
Goldman Sachs, whose workforce increased 75 percent to 22,669 employees from
1998 to 2000, envisioned a 2 million-square-foot complex with a hotel,
convention center and retail space.
Goldman Pulls Back
After cutting 3,000 employees since July 2002, Goldman is building only the
office tower and has canceled relocating its equity division from Manhattan.
Frohwirth said Goldman officials told him they are likely to move 3,500
employees to Jersey City next year, down from an initial forecast of 9,000.
``The market downturn and headcount reductions have diminished the need for
additional office space,'' said Goldman spokesman Bruce Corwin, who wouldn't
discuss specific employee numbers.
Schwab, the world's largest discount broker, two years ago leased a
575,000-square-foot building under construction to relocate some financial
advisers from Manhattan and its capital markets division from a Jersey City
building shared with other businesses. Schwab never moved in.
After eliminating 9,600 jobs since 2000, Schwab is subletting half the
building at Harborside Financial Center Plaza to Mizuho Bank Ltd. and
Instinet Group, Inc., company spokeswoman Marta Von Loewenfeldt said. Schwab
has been unable to find a tenant for the other half for more than a year.
Schwab officials declined to say how much the unused space is costing.
Equivalent space in Jersey City would rent for $7.25 million a year,
according to Grubb & Ellis figures.
As American Express's workforce grew to 88,850 from 73,620 worldwide in
three years through 2000, the company moved 560 information technology and
human resources employees to Jersey City. Hundreds more came after the
terrorist attacks forced the company from its Lower Manhattan offices.
Last March, American Express sent its workers back to Manhattan, leaving
only its nameplate on the building, said spokeswoman Molly Faust. The
company, which fired 14,000 employees in 2001, is subleasing the space to
the American International Group Inc.
The departures have sapped Jersey City's economic momentum. Richard McKeever
spent more than $1 million in 1991 to open Rosie Radigan's restaurant on the
ground floor of 10 Exchange Place, which houses insurance and brokerage
Between 1998 and 2001, with a Hyatt Regency hotel rising and more customers
coming, McKeever spent $75,000 to add a takeout area and two bars for lunch
and cocktail-hour patrons.
``I had to fight my way through the business crowd,'' McKeever said.
``Unfortunately, that's getting easier to do.'' Sales are down 25 percent
since late 2001, he said.
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