Jones Lang LaSalle
Newark’s Vanishing Vacancy Rate
New tenants are heading to One Gateway.
A flurry of office moves shows confidence in the future of the city
Shankar P.
NJBIZ Staff
6/5/2006
NEWARK - With Newark Mayor-elect Cory Booker preparing to take office next month, a new mood of optimism appears to be sweeping over downtown landlords and tenants in the state’s largest city. The upbeat sentiment has led to a series of deals in recent weeks that have left Newark Class A office space nearly filled to capacity.
Among the major moves:
• After three years of searching for a tenant, Advance Realty of Bedminster expects to sign a 12-year lease with Newark law firm Gibbons, Del Deo, Dolan, Griffinger and Vecchione for nearly 105,000 sq. ft. at One Gateway Center. The address is part of a four-building complex next to Newark Penn Station. Gibbons, Del Deo will relocate from its present home in the Legal Center about a block away.
• Also heading to One Gateway is Herrick, Feinstein, a New York City-based law firm that will move from Two Penn Plaza, leasing some 18,600 sq. ft.
• Grabbing the Two Penn Plaza space that Herrick, Feinstein vacates will be AEG, a Los Angeles-based sports and entertainment company that is developing a 20,000-seat stadium in Harrison for the professional soccer team formerly known as the MetroStars, now called Red Bull New York.
• Public Service Electric & Gas (PSE&G), which had been expected to give up 80,000 sq. ft. of space at 80 Park Plaza following the merger of its parent company with Chicago-based Exelon, will instead expand in the 1 million-sq.-ft. building. Meanwhile, Lehman Bros. is selling the property for a reported asking price of $135 million to $150 million.
• McCarter & English, which had planned to vacate its home at Four Gateway Center in February 2008, expects to sign a lease extension for an unspecified period beyond that date. Triggering the extension were permitting holdups that will delay availability of the $400 million Newark Riverfront Center that the state’s largest law firm had planned to relocate to.
"With the recent turn of events, the Newark office space market has not only stabilized, but has become very tight," says Robert Martie, senior vice president and regional managing director at Advance Realty.
The vacancy rate for Newark Class A office space was just 5.5% at the end of the first quarter, down from 6.9% a year ago, according to data compiled by Grubb & Ellis. By contrast, the vacancy rate for all classes of office space in northern and central New Jersey was 19.3% at the end of the first quarter, down from 20% in the year-ago period.
The apparent loser in the Newark office shuffle has been Matrix Development Group of Cranbury, the owner of the downtown Legal Center that Gibbons, Del Deo will vacate. Matrix is also developer of the Riverfront Center that is encountering slow going. That project includes a 14-story office tower, 500 residential units and a 150-room hotel.
Among the big winners is Advance Realty. Snatching Gibbons enables Advance to fill 135,000 sq. ft. vacant since the FBI moved out of the One Gateway Center property three years ago. The Gibbons name will go atop the building when the law firm moves in next January. "The whole economic package is attractive," says Russ Bershad, who chairs the real property and environmental department at Gibbons.
Also coming out ahead is The Olnick Organization of New York City, the owner of Four Gateway Center, which will now keep McCarter & English as a tenant beyond February 2008. While McCarter & English Chairman Drew Berry says his firm remains committed to the Matrix project, he left open the possibility of signing a new long-term lease at Four Gateway.
Berry might be forced to sign a long-term lease because landlords, who want to fill space for as much time as possible, can charge premiums of up to 300% for agreeing to short-term commitments. Berry says that if McCarter & English were faced with an unacceptable deal, he could consider office locations outside Newark.
At Matrix, first vice president Richard Johnson says he still goes by McCarter & English’s stated commitment to relocate its headquarters to Newark Riverfront Center. "We are working with them to find a way to facilitate their schedule," says Johnson. But even if McCarter drops out, he says, the market for Class A office space in Newark should be vibrant enough to allow Matrix to fill the new center.
E-mail to shankarp@njbiz.com
Newark’s Vanishing Vacancy Rate
New tenants are heading to One Gateway.
A flurry of office moves shows confidence in the future of the city
Shankar P.
NJBIZ Staff
6/5/2006
NEWARK - With Newark Mayor-elect Cory Booker preparing to take office next month, a new mood of optimism appears to be sweeping over downtown landlords and tenants in the state’s largest city. The upbeat sentiment has led to a series of deals in recent weeks that have left Newark Class A office space nearly filled to capacity.
Among the major moves:
• After three years of searching for a tenant, Advance Realty of Bedminster expects to sign a 12-year lease with Newark law firm Gibbons, Del Deo, Dolan, Griffinger and Vecchione for nearly 105,000 sq. ft. at One Gateway Center. The address is part of a four-building complex next to Newark Penn Station. Gibbons, Del Deo will relocate from its present home in the Legal Center about a block away.
• Also heading to One Gateway is Herrick, Feinstein, a New York City-based law firm that will move from Two Penn Plaza, leasing some 18,600 sq. ft.
• Grabbing the Two Penn Plaza space that Herrick, Feinstein vacates will be AEG, a Los Angeles-based sports and entertainment company that is developing a 20,000-seat stadium in Harrison for the professional soccer team formerly known as the MetroStars, now called Red Bull New York.
• Public Service Electric & Gas (PSE&G), which had been expected to give up 80,000 sq. ft. of space at 80 Park Plaza following the merger of its parent company with Chicago-based Exelon, will instead expand in the 1 million-sq.-ft. building. Meanwhile, Lehman Bros. is selling the property for a reported asking price of $135 million to $150 million.
• McCarter & English, which had planned to vacate its home at Four Gateway Center in February 2008, expects to sign a lease extension for an unspecified period beyond that date. Triggering the extension were permitting holdups that will delay availability of the $400 million Newark Riverfront Center that the state’s largest law firm had planned to relocate to.
"With the recent turn of events, the Newark office space market has not only stabilized, but has become very tight," says Robert Martie, senior vice president and regional managing director at Advance Realty.
The vacancy rate for Newark Class A office space was just 5.5% at the end of the first quarter, down from 6.9% a year ago, according to data compiled by Grubb & Ellis. By contrast, the vacancy rate for all classes of office space in northern and central New Jersey was 19.3% at the end of the first quarter, down from 20% in the year-ago period.
The apparent loser in the Newark office shuffle has been Matrix Development Group of Cranbury, the owner of the downtown Legal Center that Gibbons, Del Deo will vacate. Matrix is also developer of the Riverfront Center that is encountering slow going. That project includes a 14-story office tower, 500 residential units and a 150-room hotel.
Among the big winners is Advance Realty. Snatching Gibbons enables Advance to fill 135,000 sq. ft. vacant since the FBI moved out of the One Gateway Center property three years ago. The Gibbons name will go atop the building when the law firm moves in next January. "The whole economic package is attractive," says Russ Bershad, who chairs the real property and environmental department at Gibbons.
Also coming out ahead is The Olnick Organization of New York City, the owner of Four Gateway Center, which will now keep McCarter & English as a tenant beyond February 2008. While McCarter & English Chairman Drew Berry says his firm remains committed to the Matrix project, he left open the possibility of signing a new long-term lease at Four Gateway.
Berry might be forced to sign a long-term lease because landlords, who want to fill space for as much time as possible, can charge premiums of up to 300% for agreeing to short-term commitments. Berry says that if McCarter & English were faced with an unacceptable deal, he could consider office locations outside Newark.
At Matrix, first vice president Richard Johnson says he still goes by McCarter & English’s stated commitment to relocate its headquarters to Newark Riverfront Center. "We are working with them to find a way to facilitate their schedule," says Johnson. But even if McCarter drops out, he says, the market for Class A office space in Newark should be vibrant enough to allow Matrix to fill the new center.
E-mail to shankarp@njbiz.com
posted by Jones Lang LaSalle NJ News Blog at 4:24 PM
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