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New Jersey Attracts Tenants Leaving New York After September 11



March 1, 2002

New York, March 1 (Bloomberg) -- Financial firms and others are accelerating their move across the Hudson River to New Jersey from Wall Street following the Sept. 11 terrorist attacks.

Reuters Group LLC and Trade Web Group Inc. are among those that have leased waterfront space in Jersey City this year, joining firms such as Lehman Brothers Holdings Inc. Insurer Marsh & McLennan Cos. is moving 1,100 workers to Hoboken, north of Jersey City, while Deutsche Bank AG, Cantor Fitzgerald LP and American International Group Inc. are scouting space.

New Jersey offers tax breaks, rental rates 23 percent lower than midtown Manhattan and 8.6 million square feet of offices available or being developed, according to property broker Insignia/ESG. The competition is making it harder for New York to keep tenants and the taxes they pay at a time when the city is facing a $4.5 billion budget deficit.

``We had to move quite rapidly,'' said Michael Spencer, chief executive officer of ICAP Plc, the parent of Garban-Intercapital, a World Trade Center tenant that signed a 15-year lease at Harborside Financial Center in Jersey City. ``We simply could not find a space in Manhattan.''

Through mid-February, 19 companies that were in the Trade Center or in nearby buildings have moved or made plans to move about 16,500 employees to New Jersey, according to TenantWise Inc., a real estate broker. Those companies have leased 4.14 million square feet of space in Jersey City, compared with 2.2 million feet in lower Manhattan.

New Jersey is making the move attractive with a business employment incentive program that return 65 percent to 80 percent of an employee's withheld state income taxes to companies that create jobs in the state, said Glenn Phillips, New Jersey Economic Development Authority spokesman.

Incentive to Move

Marsh & McLennan was granted $12.4 million spread over 10 years, based on moving employees formerly in New York to Hoboken, with average wages of $75,000 a year. Twelve other companies, including Lehman, Fuji Securities Inc., and Dow Jones & Co. have been offered $77 million in tax breaks since Oct. 1, according to the development authority, though not all have accepted.

New York capped its state tax incentive program at $3,000 per employee, though the Empire State Development Corp. and the city Economic Development Corp. have provided special packages.

Companies moving to New Jersey are making a hasty decision, said John Whitehead, chairman of the Lower Manhattan Development Corp. The firms will miss out on $1.2 billion of promised federal and state aid, a portion of which will go to companies remaining or relocating to lower Manhattan, he said.

Dumb Move?

They ``are making a dumb move that they will regret before long,'' said Whitehead, whom Governor George Pataki appointed to spearhead the revival effort. ``I think we're at the low point. As things get better, as the streets get cleaner, as the subway stations reopen, as the stores reopen, people will start to say we'd better get back there.'' A downtown address still has advantages, such as the proximity to Wall Street and the Federal Reserve, he said. American Express Co. is one company that said it will move back to its headquarters at the World Financial Center, vacating temporary space in New Jersey and elsewhere.

Tenants relocating to Jersey City, though, see the move as a way of diversifying operations after the Sept. 11 attacks showed the risk of concentrating in one place.

In October, Morgan Stanley Stanley Dean Witter & Co. sold a tower it was building two blocks from its Times Square base to Lehman and bought Texaco Inc.'s former headquarters in Harrison, New York, to accommodate its expansion plans. Lehman, which was based in the World Financial Center, across from the Trade Center, has leased more than 400,000 square feet in Jersey City.

Cheaper Rents

``The issues that have been paramount are geographical dispersion and creating a multiple infrastructure,'' said Mitchell Hersh, chief executive of Mack-Cali Realty Corp., which owns and operates the Harborside Financial Center in Jersey City.

Cheaper space is another factor. Waterfront rents average $37.84 a square foot, compared to $49.24 a foot in midtown Manhattan, and $40.76 in lower Manhattan, said Insignia/ESG.

TradeWeb, a bond trader based in the Trade Center, agreed last month to move to Jersey City. Reuters' Instinet Group Inc. is in talks to lease about 150,000 square feet, while Deutsche, Cantor and AIG may also rent in Jersey City, said Hersh.

Other landlords include Lefrak Organization, builder of the Newport World Business Center, Hartz Mountain Industries, which is developing the Colgate Center, and SJP Properties, developer of the Hoboken property where Marsh & McLennan is moving. For Garban, the move made sense because most of its employees live in New Jersey, Spencer said.

``Our staff needed some form of stability and assurance,'' Spencer said. ``It was a practical decision. Prior to Sept. 11, we had no desire to move out of Manhattan.''

2002 Bloomberg L.P. All rights reserved.

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