Hudson Waterfront poised for growth - Industry Overview

Bidding wars used to decide nearly every office lease negotiated in New Jersey's Hudson Waterfront market. With virtually no available space in its 17 million-SF inventory and an unparalleled national and global corporate presence, the waterfront -- especially Jersey City -- had emerged as the defacto alternative to Manhattan.

But like everywhere, today's Hudson Waterfront market, which also includes Hoboken and Weehawken, is showing signs of the economic slowdown. During the past year, inventory has grown by another 2.5 million SF, while bidding wars for new space are rare. At the same time, the market continues as the strongest in the state. While the vacancy rate is from virtually nothing last year, it still remained a farily healthy 10.9% at the end of the third quarter of 2002.

The bulk of today's Hudson Waterfront availabilities, which total approximately 1.8 million SF, are on the market as sublease space. In fact, only one large block -- 400,000 SF at MackCali's Harborside Plaza V in Jersey City -- is available as a direct lease. This has shielded the region's landlords from immediate impact.

One of the most positive notes for the region is that tenant demand exists. Instinet recently subleased 144,000 SF, and Mizuho Bank subleased 107,000 SF at Harborside Plaza X in Jersey City. Cushman & Wakefield is marketing the 575,000-SF building for Charles Schwab.

We have seen proposals for headquarters and back-office requirements of about 1 million SF from several tenants looking closely at the Hudson Waterfront, including a publishing company and several financial services firms.

These corporations will likely absorb space for which several waterfront tenants are actively seeking sublessees. For example, at Newport Office Center VII in Jersey City, Cushman & Wakefield is marketing a 497,000-SF sublease for UBS/PaineWebber. The 1.1 million-SF building, which UBS/PaineWebber pre-leased in its entirety, is under construction and slated for completion next year.

The bottom line remains that the Hudson Waterfront is one of the most dynamic markets in the New York metropolitan region. Every company considering a relocation from Manhattan, and those coming into the New York area for the first time, look at Jersey City.

While the short-term impact of the economic downturn is evident as developers cutback on new construction plans and landlords exercise increased flexibility during lease negotiations, the long-term outlook for the Hudson Waterfront is strong. All indicators dictate that the market will come back with renewed momentum and continue its evolution as one of the nation's most attractive office hubs.

COPYRIGHT 2002 Hagedorn Publication
COPYRIGHT 2002 Gale Group