By Robert Rudin, Vice Chairman – Director of Consulting
There will always be something about Manhattan that makes it – well, Manhattan. Businesses continue to take pride in locating there, and for good reason. Over the past decades, however, a shift has developed that finds more and more businesses attracted to the Jersey side of the Hudson. A confluence of factors are now contributing to the boom particularly in Jersey City, with the perfect mix of a strengthening housing market, a sudden increase in the availability of office space, and built-in rent advantages that combine to make both Jersey City and Hoboken incredibly attractive. Add to that the fact that public transit provides easy access from anywhere in New York, and west of the Hudson is primed to go to the next level, fulfilling its prophesy of becoming “The Sixth Borough.”
Jersey City is $49/sq. ft. less expensive, per annum, than comparable New York City space. One of the historic drivers of commercial activity here has been the New Jersey Economic Development Authority benefits that make rents so attractive. That continues to be the case today, but other cost factors are now contributing to the allure, as well: rent, free rent, taxes, build-out costs, loss factor, as well as the above-referenced state benefits, all combine to create the aforementioned savings.
There are currently approximately 7,000 residential units coming online, with another 8,000 approved in Jersey City. Hoboken has been a hub for younger, millennial residents for some time now, and Jersey City has quickly caught up. Grove Street has become an area with a distinctly Brooklyn “vibe.” Hoboken and Jersey City have become destinations, not afterthoughts, and are places where people want to live. For businesses, this means a built-in workforce, which only adds to the attraction of relocating there. On top of which, the current availability rate of 11% (which consists of 25 office buildings totaling over 16 million square feet) is about to spike to 17% within a year. Businesses will have a great selection of rentable space, much of which can be customized to their preferences. More than 10 buildings will have blocks of space over 100,000 sq. ft., and several, such as 3 Second Street, are state-of-the-art, glass-curtain wall, Class A architectural statements.
Some companies go for the best of both worlds – maintaining the prestige of the Manhattan address while splitting some of their operations to Jersey City, thus taking advantage of both the millennial work force and the significantly lower rents. Tory Burch recently did exactly this, taking advantage of more than $10 million in tax incentives and moving their operations from a 37,000-sq. ft. space in Manhattan to a location three times the size in Jersey City. In so doing, they transferred more than 100 jobs to the city, and will create nearly 40 more.
I think we’re going to start seeing a lot more Tory Burches in the near future. Household names such as Amazon, Citigroup, Komar Apparel, PWC, Chase, and Newell Rubbermaid have long standing commitments to the area. Jersey City especially is primed for this sort of positioning as the best alternative to Manhattan, a more affordable location in a beautiful city with a built-in work force and easy access to Manhattan. This is a unique moment, and it will be exciting to watch it play out.
For more information about Cushman & Wakefield’s commercial real estate service offerings in the New Jersey market, visit us here.
Mr. Rudin is a Vice Chairman and Director of Consulting for Cushman & Wakefield’s New Jersey office brokerage practice. With more than three decades in the commercial real estate industry, Mr. Rudin has been involved in planning and implementing more than 10 million square feet of headquarters and regional office transactions, as well numerous distribution and investment sales transactions.