Jones Lang LaSalle
Jersey City's allure
Firms crossing river again as NY prices soar; space for back-office operations
by Julie Satow
Late last year, Societe Generale was bursting with new hires and in dire need of more office space. The French financial institution searched all five boroughs, Westchester and Connecticut. It settled on Jersey City.
"Jersey City was by far the best economic alternative," says Jerry Aversano, the head of facilities management for the bank. The company relocated 350 employees from two locations in midtown into a 92,000-square-foot office on the Jersey waterfront.
Jersey City is once again emerging as a cheap alternative for office space as midtown rents surge to historic highs and downtown firms get displaced by residential conversions. The rebuilding effort at the World Trade Center site, which will transform downtown into a massive construction zone, is also driving some lower Manhattan tenants to find temporary space in Jersey City.
As the pricing gap widens between Manhattan and Jersey City, the exodus, now just a trickle, could become a flood, dragging thousands of jobs across the river.
"New York companies have to look in Jersey City now because the savings are so dramatic," says Frank Doyle, a managing director at Jones Lang LaSalle.
Financial firms are taking the leasing lead. Along with Societe Generale, financial services giant Citigroup Inc., asset manager Northern Trust and hedge-fund administrator Citco Fund Services are hopping on the PATH train west.
NYC still tops
"There has been a dramatic increase in leasing activity over the last six months," says Mitchell Hersh, chief executive of Mack-Cali Realty Corp., a large New Jersey landlord.
Of course, most firms would still rather pay through the nose than move out of town. Even among those companies that open offices in Jersey City, most relocate only back-office employees, not the brokers and traders who interact directly with clients. Another strike against Jersey City is the longer commute, particularly from Westchester and Connecticut.
"A move to Jersey City could create serious aggravation," says Shawn Banerji, an executive director at executive search firm Russell Reynolds Associates. "When you move jobs to Jersey City, inevitably there is going to be some amount of attrition."
The first time companies flocked to Jersey City was during the height of the dot-com boom, when businesses pledged to move 20,000 jobs across the Hudson River in the first eight months of 2000 alone.
More recently, Manhattan-based companies fled the island in the wake of the Sept. 11 attacks. Many of those firms soon returned to New York, and average asking rents in Jersey City dropped from a high of $38 a square foot to $29 a square foot, where they have remained.
Half the price
That's the current draw. At such prices, companies taking space in Jersey City now pay about half of what they would pay in midtown. They pay the same as they would downtown, but in Jersey City they get more modern buildings with better amenities. Of course, 7 World Trade Center boasts plenty of freshly built space, but its prices are high, and it's smack in the middle of the Ground Zero construction zone.
Throw in special tax rebates per employee that could be valued at up to $30 a square foot, and Jersey City becomes too good a bargain to pass up, says Mark Ravesloot, an executive vice president at CB Richard Ellis.
The wave of conversions transforming lower Manhattan into a largely residential neighborhood is driving much of the current movement west. With 250 West St. slated to go condo, Citigroup is negotiating to relocate its 1,500 employees housed there into a 370,000-square-foot space in Jersey City.
Northern Trust is another victim of residential sprawl. Its 40 Broad St. location is scheduled for conversion, so the firm will move its 65 employees into a 27,000-square-foot space across the river in September.
Shifting employees
For other tenants, the motivation is purely financial. Citco will shift 300 employees to Jersey City from midtown later this summer, and has plans to hire an additional 200 workers to fill out the space. Societe Generale continues to expand and does not rule out leasing additional space in Jersey.
Other companies that have relocated include CDC IXIS, a subsidiary of French banking concern Groupe Caisse d'Eargne, which leased 72,000 square feet in Jersey City. Moody's Investors Service, headquartered in lower Manhattan, recently doubled its Jersey City space to 80,000 square feet.
"We tend to see our greatest activity on the waterfront when the market is tight in New York City," says Mr. Ravesloot.
Comments? JSatow@crain.com
Jersey City's allure
Firms crossing river again as NY prices soar; space for back-office operations
by Julie Satow
Late last year, Societe Generale was bursting with new hires and in dire need of more office space. The French financial institution searched all five boroughs, Westchester and Connecticut. It settled on Jersey City.
"Jersey City was by far the best economic alternative," says Jerry Aversano, the head of facilities management for the bank. The company relocated 350 employees from two locations in midtown into a 92,000-square-foot office on the Jersey waterfront.
Jersey City is once again emerging as a cheap alternative for office space as midtown rents surge to historic highs and downtown firms get displaced by residential conversions. The rebuilding effort at the World Trade Center site, which will transform downtown into a massive construction zone, is also driving some lower Manhattan tenants to find temporary space in Jersey City.
As the pricing gap widens between Manhattan and Jersey City, the exodus, now just a trickle, could become a flood, dragging thousands of jobs across the river.
"New York companies have to look in Jersey City now because the savings are so dramatic," says Frank Doyle, a managing director at Jones Lang LaSalle.
Financial firms are taking the leasing lead. Along with Societe Generale, financial services giant Citigroup Inc., asset manager Northern Trust and hedge-fund administrator Citco Fund Services are hopping on the PATH train west.
NYC still tops
"There has been a dramatic increase in leasing activity over the last six months," says Mitchell Hersh, chief executive of Mack-Cali Realty Corp., a large New Jersey landlord.
Of course, most firms would still rather pay through the nose than move out of town. Even among those companies that open offices in Jersey City, most relocate only back-office employees, not the brokers and traders who interact directly with clients. Another strike against Jersey City is the longer commute, particularly from Westchester and Connecticut.
"A move to Jersey City could create serious aggravation," says Shawn Banerji, an executive director at executive search firm Russell Reynolds Associates. "When you move jobs to Jersey City, inevitably there is going to be some amount of attrition."
The first time companies flocked to Jersey City was during the height of the dot-com boom, when businesses pledged to move 20,000 jobs across the Hudson River in the first eight months of 2000 alone.
More recently, Manhattan-based companies fled the island in the wake of the Sept. 11 attacks. Many of those firms soon returned to New York, and average asking rents in Jersey City dropped from a high of $38 a square foot to $29 a square foot, where they have remained.
Half the price
That's the current draw. At such prices, companies taking space in Jersey City now pay about half of what they would pay in midtown. They pay the same as they would downtown, but in Jersey City they get more modern buildings with better amenities. Of course, 7 World Trade Center boasts plenty of freshly built space, but its prices are high, and it's smack in the middle of the Ground Zero construction zone.
Throw in special tax rebates per employee that could be valued at up to $30 a square foot, and Jersey City becomes too good a bargain to pass up, says Mark Ravesloot, an executive vice president at CB Richard Ellis.
The wave of conversions transforming lower Manhattan into a largely residential neighborhood is driving much of the current movement west. With 250 West St. slated to go condo, Citigroup is negotiating to relocate its 1,500 employees housed there into a 370,000-square-foot space in Jersey City.
Northern Trust is another victim of residential sprawl. Its 40 Broad St. location is scheduled for conversion, so the firm will move its 65 employees into a 27,000-square-foot space across the river in September.
Shifting employees
For other tenants, the motivation is purely financial. Citco will shift 300 employees to Jersey City from midtown later this summer, and has plans to hire an additional 200 workers to fill out the space. Societe Generale continues to expand and does not rule out leasing additional space in Jersey.
Other companies that have relocated include CDC IXIS, a subsidiary of French banking concern Groupe Caisse d'Eargne, which leased 72,000 square feet in Jersey City. Moody's Investors Service, headquartered in lower Manhattan, recently doubled its Jersey City space to 80,000 square feet.
"We tend to see our greatest activity on the waterfront when the market is tight in New York City," says Mr. Ravesloot.
Comments? JSatow@crain.com
posted by Jones Lang LaSalle NJ News Blog at 8:51 AM
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