BRIGHT SPOT
Commercial vacancy rate is low in Hudson County

Monday, February 23, 2009
By AMY SARA CLARK
JOURNAL STAFF WRITER

In at least one major indicator of the region's economic health, Hudson County is doing comparatively well.

Hudson County had the lowest vacancy rate in the state for commercial real estate for the fourth quarter of 2008, according to a report released this month.

"Hudson has been a bright spot in an otherwise weak commercial office space market," said Joseph Seneca, the professor at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University who co-authored the report.

"In a period when the financial industry is paying attention to costs - it didn't have to for a long time - the competitive position of the Hudson waterfront is a significant factor" in the county's relatively low vacancy rate.

In the fourth quarter of 2008, Hudson County had 2.14 million square feet of vacant office space, or 8.6 percent, including offices that are trying to sublet extra space.

Statewide, the average was 15.8 percent, according to the Sitar-Rutgers Regional Report, issued by Rutgers University and Sitar Company ONCOR International, an Iselin-based commercial real estate broker.

"Jersey City has always been somewhat more resilient than the other markets," according to David Stifelman, executive director of the commercial real estate firm Cushman and Wakefield New Jersey, which represented 643,210 square feet - or 53 percent - of the new leasing activity in Hudson County last year. "It's slowing down, but not at the pace that the other markets have."

While he saw "a dramatic falloff of leasing activity" in the fourth quarter of 2008 for northern New Jersey, Hudson County's proximity to Manhattan and lower lease prices lure businesses across the river, as do New Jersey's lower operating expenses and real estate taxes, as well as a supply of office-ready modern buildings, he said.

CONTINUED GROWTH

Examples of continued growth include AXA Financial, which leased 244,957 square feet at 525 Washington Blvd. in Jersey City's Newport section, and MLB Productions, Major League Baseball's new cable television station, which leased 142,271 square feet at 40 Hartz Way in Secaucus.

In total, Hartz Mountain Industries, owner of the Harmon Cove development where MLB Productions set up shop, rented out approximately 4 million square feet of office, retail and industrial space in 2008.

In fact, Hartz felt a "dramatic flurry" of leasing activity occurred, due in large part to an extensive print and television advertising campaign touting up to a 63 percent savings in leasing costs for companies moving from Manhattan to Secaucus, the company said.
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Another shoe could drop, though.

"There are concerns about the continued scaling down in employment in the financial sector, both in Manhattan and New Jersey," Seneca said. "That has inevitably had space implications."

LAYOFFS VS. DEALS

While layoffs in the financial industry could hurt Hudson County's office space market, the effect could be balanced by an increase in companies crossing the Hudson in search of lower rents.

It's too early to tell which effect will have a greater impact on Hudson's commercial real estate market, Seneca said.

"Those two forces will be playing out over the next year," he said.

Stifelman added that the economic downturn is also lowering leasing costs in Manhattan, meaning that not all cash-strapped companies will have to move to New Jersey to get a better deal.

"They're now having the ability to find less expensive space in Manhattan due to the contraction, giving people who want to stay in Manhattan the opportunity to stay in Manhattan," he said.

'GRAY VACANCY'

Another area of concern is "gray vacancy" - office space that companies are paying for but are keeping empty due to layoffs - according to Jamie LeFrak, managing director of the LeFrak Organization, the builder of Newport, which has 5 million square feet of commercial real estate space.
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As long-term leases run out, he expects companies to downsize, creating more vacancies.

"Our direct vacancy rate, taken today, is probably about 1 percent, but the amount of gray vacancy is probably close to 30 percent," he said.

Jeff Kaplowitz, a commercial real estate broker at Century 21 Plaza and a former member of the Jersey City Planning Board, said even though Hudson County has the lowest vacancy rate in the state, 8.6 percent - or 2.14 million square feet - is still a lot of vacancies.

"Percentage-wise it doesn't sound like a lot, but that's a lot of space," he said.

Like Stifelman, Kaplowitz has witnessed a drop-off in rentals recently.

"From October until January literally nothing was happening. It's completely dead," he said. "I think the next few months are going to be very, very hard."

Mayor Jerramiah T. Healy is also concerned about the future.

"Our Downtown waterfront continues to be the 12th largest in the nation in respect to office space," he said. "However, due to the continuing downturn in the economy, no one can predict where we will be by the end of this calendar year."

Office vacancies lowest in state, but time of fear

Tuesday, February 10, 2009
By AMY SARA CLARK
JOURNAL STAFF WRITER

Chin up, Hudson County. There's a nugget of good news about the economy.

Hudson County had the lowest vacancy rate in the state for commercial real estate for the fourth quarter of 2008, according to a report released yesterday.

"Hudson has been a bright spot in an otherwise weak commercial office space market," said Joseph Seneca, the professor at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University who co-authored the report.

In the fourth quarter of 2008, Hudson County had 2.14 million square feet of vacant office space, or 8.6 percent. The percentage includes offices that are trying to sublet extra space.

Statewide, the average was 15.8 percent, according to the Sitar-Rutgers Regional Report, issued by Rutgers University and Sitar Company ONCOR International, an Iselin-based commercial real estate broker.

One example of continued growth is MLB Productions, Major League Baseball's cable television station, which leased 142,271 square feet at 40 Hartz Way in Secaucus last fall.

However, the good news might not last, Seneca said.

"There are concerns about the continued scaling down in employment in the financial sector, both in Manhattan and New Jersey. That has inevitably had space implications," he said.

Jamie LeFrak, managing director of the LeFrak Organization, the builder of Newport, which has 5 million square feet of commercial real estate space, said even though Hudson County has the lowest vacancy rate in the state, there are a lot of "gray vacancies" - office space companies are paying for, but that is empty due to layoffs.

As long-term leases run out, he expects companies to downsize, creating more vacancies.

"Our direct vacancy rate, taken today, is probably about 1 percent, but the amount of gray vacancies is probably close to 30 percent," he said.

Jeff Kaplowitz, a commercial real estate broker at Century 21 Plaza and a former member of the Jersey City Planning Board, said even if Hudson County has the lowest vacancy rate in the state, 8.6 percent is still a lot of vacancies.

"Percentage-wise it doesn't sound like a lot, but that's a lot of space," he said.

He said he's witnessed a huge dropoff in rentals.

"From October until January literally nothing was happening. It's completely dead," he said. "I think the next few months are going to be very, very hard."

Mayor Jerramiah T. Healy is also concerned about the future.

"Our Downtown waterfront continues to be the 12th largest in the nation in respect to office space. However, due to the continuing downturn in the economy, no one can predict where we will be by the end of this calendar year."