Jones Lang LaSalle


Courting office space in Newark
Tuesday, May 30, 2006
BY MATTHEW FUTTERMAN
Star-Ledger Staff

Last year, Newark's oldest law firm announced it was moving from the Gateway complex to a 400,000-square-foot building on the city's waterfront that would bear its name.

Now, McCarter & English is negotiating an extension of its Gateway lease, which expires in 19 months, raising questions about the future of the $400 million project Matrix of Cranbury plans to anchor with the law firm. The office tower, an adjacent hotel, retail space and a residential complex would have been one of the biggest private developments in Newark in more than a decade.

Separately, the law firm Gibbons, Del Deo, Dolan, Griffinger and Vecchione is closing in on a deal to leave the Matrix-owned Legal Center across from Penn Station for 100,000 square feet of space at One Gateway Center, creating a difficult one-two combination for any developer.

Despite the setbacks, Matrix Chief Executive Joe Taylor said last week he is confident he can overcome substantial permitting delays on its waterfront project and replace Gibbons if the law firm does vacate the Legal Center in January.

"We're dedicated to moving ahead with the overall project, but we are very determined to find a way to facilitate the McCarter & English schedule," Taylor said. "But you can't fault the owners of other buildings from doing all they can to retain their tenants and be competitive."

Indeed, the legal industry's game of musical chairs comes at a time of renewed interest and activity in Newark's office market despite a wave of violent crime that threatens to put the city's renaissance on hold. While the law firm developments may temporarily spell bad news for Matrix, it is likely to tighten the real estate market, especially around Penn Station, and steer more business to empty spaces on Broad Street to an area where the city has been trying to drive development in an effort to revive its main downtown corridor.

Last month, Rutgers announced it intended to take 11 floors of a building on the northern end of Broad Street at 1 Washington Park to build a business school.

"The market is getting stronger, especially with the Rutgers deal at 1 Washington," said Christian Benedetto, principal at National Redevelopment, a leading broker in the city.

Since 2004, Newark's vacancy rate has dropped to 13.4 percent, from 17.5 percent, according to market research from CB Richard Ellis, the state's largest commercial real estate brokerage.
Richard Charles, a broker with CB Richard Ellis who specializes in the Newark market, said several recent deals for space in the less desirable, and therefore cheaper, north end of Broad Street have caused the average rent price to drop slightly. But interest is rising and the election of Cory Booker as mayor has helped given the city positive buzz, he said.

"There is a noticeable upturn," Charles said. "Even though the Gibbons deal will create a 100,000-square-foot hole in the Legal Center, that is considered one of the city's best buildings."

Nowhere has interest been more intense and space at more of a premium than at the Gateway complex and the handful of other buildings next to Penn Station.

Drew Berry, executive director of McCarter's executive committee said the company's plans are up in the air, but that it clearly will not be in a new Matrix building when its current Gateway lease expires.

"The Matrix project has encountered some delays," Berry said. "We are in discussions with our current landlord about an extension of our lease."

Charles, who represents the building's owner, the Olnick Organization, said the company can't make a decision on a short-term lease for McCarter until the law firm decides where it wants to be for the long term.

"I don't think anyone really knows what McCarter wants to do," he said.

Russ Bershad, head of the real property and environmental department at Gibbons, said his firm has decided to move across the street rather than try to renovate their current space while they are in it.

"The needs of law firms have changed since we moved 15 years ago," Bershad said. "We're going to be able to put our money into a fantastic new conference center and lawyers' lounge instead of large individual offices for lawyers."

Bob Martie, a top executive with Advance, which bought Gateway One three years ago for $85 million and will spend $25 million renovating the building, said the company is not surprised to see Newark's fortunes turning for the better.

"It amazes me that anyone could not be bullish on Newark," Martie said. "There are a lot of hidden jewels in this city."

Matthew Futterman may be reached at mfutterman@starledger.com or (973) 392-1732.

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