It’s hard to read the newspaper these days without coming across a story extolling the virtues of Jersey City’s corporate waterfront development. The Merrill Lynches, the PaineWebbers, the Goldman Sachses have found a safe haven here from the high rents in Manhattan. But perhaps the most interesting thing to come out of the waterfront development, according to some officials, is the possible conversion of the city’s traditionally downtrodden interior into a back office zone.
With a planning department that has dozens of projects pending before it and developers eager to put up modern, efficient buildings in 12 to 18 months, Jersey City is still seething with construction. Some statistics show that by 2004, Jersey City will have more modern “Class A” office space than big cities like Atlanta or downtown Pittsburgh.
The traditional spaces for development, like Exchange Place and Newport, both of which are on the waterfront, continue to bloom. Newport has plans to add nearly 4,000 new apartments and 41,000 square feet of new office space to its Northeast Quadrant, a 31-acre swath just east of Washington Blvd., and a building to house Chase Manhattan is under construction. At Exchange Place, Goldman Sachs will build its 875-foot tower at 30-50 Hudson St. Now the city and developers are eyeing Journal Square and the Grove Street area as new back office meccas, much like Manhattan companies eyed the Jersey City waterfront more than a decade ago.
Sprang to life
The Newport area on the waterfront was one of those early destinations.
“When we started in 1985, there were packs of wild dogs at Newport,” said Tom Leane, a former planning director who saw the initial development of the area and later headed the Jersey City Redevelopment Agency. Leane now works as a development consultant for Pegasus development group of Hoboken.
These days, the former railyard land that is Newport is owned by Queens-based developer Samuel J. LeFrak. It sports a mall, a cluster of modern spacious commercial space, and new luxury high rises.
For Bret Schundler’s chief of staff, Tom Gallagher, the city offers the right incentives.
“Unlike some other urban communities, we’ve signaled to developers where we want the city to grow,” Gallagher said recently. He pointed to the city’s redevelopment plans, which are tailored with developers’ needs in mind, and often, with developers’ input. Tax abatements for developers don’t hurt, either.
Gallagher sees the psychological barriers that once prevented companies from relocating here crumbling. The city has built a “critical mass” of new construction, he said, so that developers and now residents are comfortable in Jersey City.
“So,” said Gallagher, “you don’t have people who say, ‘Gee, five years from now, what will it be like?'” The political instability in the city’s past was another barrier, said Gallagher, because “Jersey City had a long and colorful political history. And while that may be good for a novel or two, it isn’t good for real estate development.”
Filling the space
But businesses looking for industrial space for manufacturing, distribution and warehousing are finding a shortage of space, said city Planning Board chairman and commercial real estate guru Jeff Kaplowitz. Nevertheless, he sees the current commercial development on the waterfront lasting at least another two to three years, depending on the market.
Agreeing with him is James W. Hughes, Dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. He sees the growth of commercial space as less risky than the 1980s, when building far outstripped the demand.
“If the economy does slow down,” he said, “we’re probably not going be as bad off as last time.” Last time, Hughes said, buildings remained vacant well into the mid-’90s.
New York’s woes are to Jersey City’s benefit, he said.
“New York City seems incapable of adding office inventory,” said Hughes. “It leaves firms little choice but to move to New Jersey.”
And the reason it’s Jersey City and not other parts of the state?
Cost and transportation, Hughes said. The PATH trains between parts of New York and Jersey City cost only $1. Then, there are the ferries and the new light rail system that continue to make the region attractive.
Not just the back office
For years, Jersey City has been a “back office” center – essentially space for operations like payroll, human resources and other support staff for the larger Manhattan-based corporations. But when a company like Goldman Sachs moved its entire operation over the river, and prices along the river continued to rise (the current Hudson County waterfront vacancy rate is at a miniscule .1 percent), it forced officials and developers to think ahead to the next commercial location.
Right now, office space along the Jersey City waterfront is about half the price of Manhattan – where some tenants are paying as much as $100 per square foot in Midtown (though prices generally are in the $40 to $50 range in downtown Manhattan, Jersey City’s main competition). Jersey City still hovers comfortably around $23 to $36 per square foot. Even that is changing, though – the Mack-Cali-owned Harborside V building on the waterfront will now be asking over $40 per square foot, according to Dan Frohwirth, Director of Real Estate at the Jersey City Economic Development Corporation.
The higher prices will be to Journal Square’s benefit.
Until recently, Journal Square, the area near where Kennedy Blvd. intersects Bergen Avenue, was frequently mentioned as one of the places to be avoided in the city. That perception has changed dramatically.
“Journal Square will become the back office to Jersey City downtown, what Jersey City downtown was to the back offices for New York City companies 10 years ago,” said Kaplowitz.
But it’s not just back office operations that will be coming to Journal Square. Internet companies have begun moving into the 16-story building at 26 Journal Square, which at one time housed the offices of legendary mayor Frank Hague.
The key, said Kaplowitz, is getting government involved in the revitalization of the square.
And the government wants to get involved, said Chief of Staff Gallagher.
“Journal Square is more accessible than Brooklyn,” Gallagher said, citing the convenience of the PATH station at Journal Square, which also hosts buses. “Or Long Island City,” Gallagher added, ticking off places where fleeing Manhattan businesses have alighted.
“In the next decade,” he said, “you’ll see a rebirth in the area.”
The flow of new towers will touch the Grove Street PATH area as well, as plans for a 26-story tower at the corner of Grove Street and Newark Avenue by Bridgewater-based Shenkman-Kushner and a residential/commercial complex by Jersey City-based Joseph Panepinto to be constructed on Christopher Columbus drive will draw new offices to the Downtown area.
Hoboken and Secaucus benefit
Expansive commercial development in Hudson County is not restricted to Jersey City alone. Places like Hoboken and Secaucus are getting their piece of the pie.
Hoboken recently broke ground on the South Pier just north of the Erie-Lackawanna train terminal for Wiley Publishing. The nearly 200-year-old New York firm will bring hundreds of employees to two 13-story waterfront office towers. The publisher will occupy roughly half of the space, and the city is looking to attract other firms to the other half.
It shouldn’t be difficult.
Hoboken Mayor Anthony Russo said that he’d like to continue to see development of mixed-use properties. The South Waterfront will also host a residential building and a hotel.
Russo pointed to the fact that Hoboken’s streets reach all the way to the water and are not blocked off by “massive” development. “We don’t want a city within a city,” Russo said. “We don’t want a walled-off city.” In Secaucus, the Allied Junction development on top of a proposed train transfer station will add four million square feet of office space, and developers and officials see the site as an anchor point and center for continued development.
The new $100 million Gateway Expo and Convention Center at the Meadowlands, proposed for a 2002 opening, will also help attract business to the area.