A view of Harborside 3 in Jersey City — Courtesy: Mack-Cali Realty Corp.
By Joshua Burd
Demand for Class A office space is surging along the Hudson waterfront.
But commercial landlords in Jersey City are anything but satisfied.
That was evident during a panel discussion at the second annual Jersey City Summit, a daylong conference that drew some 700 developers and real estate professionals on Thursday. During one of six roundtables at the event, five of the city’s biggest property owners spoke about the need to both readapt their buildings and help move the submarket toward more of a vibrant, mixed-use environment — all with the goal of ensuring that strong leasing activity continues.
“Everyone is looking for the best and the brightest, and they want to be able to attract them to a work environment that stimulates them and gets the best work out of them,” said Adam Popper, a senior vice president with Columbia Property Trust. “And I think, as landlords, our obligation is to reach out and help the tenants create that environment for their employees.”
For instance, Columbia is taking a proactive approach to its 19-story office tower known as 95 Columbus. The property is 95 percent leased, he said, but the owner is now looking at ways to reposition its parking garage to “add more streetscape” along Christopher Columbus Drive.
As it stands today, the garage is a “physical barrier,” but the firm believes that finding a way to “animate our street and be more inviting to the neighborhood … is vitally important.”
The panelists spoke as office leasing thrives along the Hudson waterfront. Vacancy is around 12 percent, while recent deals in Jersey City have attracted rents around $40 per square foot.
Thursday’s conference also highlighted the multifamily construction boom in the city, trends in retail and emerging residential neighborhoods. But the late morning office panel, with the Manhattan skyline as a backdrop, touted a market that is still a lower-cost alternative.
The owners said they are now looking to diversify beyond the banking and financial service firms that helped build the Jersey City submarket years ago. Ensuring that those tenants — in sectors such as technology, advertising and media — continue to cross the Hudson River is a matter of creating the right setting and focusing on age and demographics.
“You’re spending a lot more time thinking about: What is your target audience? How do you cater to them?” said Rajiv Patel, president of Spear Street Capital. “There are certain things you never compromise, like the professional nature of your space, the institutional quality of your space and the services that are provided to a tenant base. But in terms of the brand of the product, I think that is really where a lot of the observations and a lot of thinking is directed.”
Such tenants are driving the shift toward denser spaces and benching, a trend that landlords are embracing. But doing so requires them to readapt their buildings: Michael DeMarco, president of Mack-Cali Realty Corp., said that office buildings of past generations were built to house four or five employees per thousand square feet, but today’s tenants are seeking to increase that density by as much as 50 percent.
That means spaces need larger restrooms, reconfigured floors and updated HVAC systems.
“Buildings have to technologically advance to what people want to do in the workforce,” DeMarco said. “The open seating is great and it’s great for communal conversations, but it taxes the systems of buildings, so all of the buildings have to be rehabbed.”
Mack-Cali, the largest office landlord on the waterfront, has announced plans to spend $50 million to $75 million to transform its 4.3 million-square-foot footprint in Jersey City. It’s also pushing to create a local special improvement district, which could bring new amenities such as public dining spaces and Wi-Fi along the length of the waterfront.
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The office building that hosted the conference, Spear Street’s 70 Hudson, was a reminder that the waterfront also lacks street-level retail. Gus Milano of Hartz Mountain Industries, whose firm originally developed the complex in 2000, said that type of space was not considered a priority at the time.
“We didn’t think it would work well with the property,” said Milano, president and chief operating officer of the Secaucus-based firm. “But if we were to go back, we would try to figure out how to incorporate some retail, because there’s really a dearth of it in Jersey City, and particularly along the waterfront.”
Other panelists agreed, but said it was important to “curate” the retail. Popper, the Columbia Property Trust executive, said being selective would help inject character into the submarket and ensure that it doesn’t take on the feel of a suburban strip mall.
“(We’re) at a point where all of these owners and developers are sitting down and talking about reimagining our buildings for the new workplace, trying to address our tenants’ needs and how to add value to our buildings,” Popper said. “But at the same time, it’s really important that, as we all come together, that we don’t try to homogenize the retail. … Everyone in this room has to start thinking much more holistically.”
Priming the pump
Going back to the incentive grants that helped attract Goldman Sachs more than a decade ago, the Economic Development Authority has played a key role in bringing business to Jersey City.
That figures to continue as the city’s office market evolves beyond the financial services sector. For instance, the state has offered powerful tax credits in recent years to help lure media companies such as Forbes and marketing firms such as Omincom Group Inc. to Jersey City.
“One of the problems with governments, when they come into a market, they prime the pump but they don’t let it kick in,” said Tim Lizura, the EDA’s president and chief operating officer. “I think Jersey City is at a place now where we actually have it humming, and I think it’s really a good story.”
The waterfront office sector is just one area in which the EDA has supported Jersey City, Lizura said. All told, the authority has approved about 40 projects across the city, representing more than $1 billion in investment.
“We’re only a small portion of the total landscape of the city, both projects and investment,” he said. “So for the long haul, Jersey City is going to be set up with a quality housing and office stock that will suit it very well.”
