NEWARK-New Jersey is lagging the United States in crawling out of a very deep economic hole, so said speakers at the Newark Regional Business Partnership Annual Real Estate market forecast, held at the Best Western Robert Treat Hotel here. However, a number of state and local programs are encouraging some projects in Newark, and the New York City recovery may even encourage people to move to the city in search of affordable housing.
Even so, the economic recovery is not exactly robust. “We really are on the road to recovery, but the bottom was so low, it’s going to be an inch-by-inch process,” said Rae D. Rosen, senior economist and assistant vice president, Federal Reserve Bank of New Jersey. “Things have bottomed out, and it’s picking up, but boy, is it weak.” Job growth is lagging--and the figures are deceptive. Unemployment figures are affected by the number of workers who’ve simply given up, Rosen noted. When the economy picks up enough, however, they may re-enter the search, slowing that recovery. “The decline in employment has stabilized but there has been no pickup,” Rosen said. “New Jersey lags the nation and New York City.”
New Jersey also lags the country in terms of the commercial real estate recovery, said Philip Lipper, senior vice president and co-branch manager of Studley. As New York and much of the rest of the United States is seeing a slow comeback in the office market, New Jersey remains stagnant. “New York rents exploded over the last decade,” Lipper said, doubling, then dropping, and now at about 2006 levels. “New Jersey is just a big flat line.”
Overall office rents are $29.59 per square foot, statistically flat for the decade, while class A office space has risen from $27.02 to $27.06, again essentially unchanged. One reason was that most new leases were a flight to quality, as companies sought better spaces that had become more affordable. In addition, as likely as not these firms are downsizing, taking smaller spaces for the same number of employees.
Retail sales have picked up, and some stores are expanding cautiously, said Kate Coburn, a partner at HR&A Advisors. But Newark’s history as a 9 am to 5 pm location is challenging. Stores want people living downtown in an area that’s perceived as safe. “For retail to be successful, it really needs to be clustered,” she said. “The success of the Ironbound is that it’s a mix of residential and stores, and it’s walkable.” A number of big-box retailers have closed stores, with the those facilities being turned into a number of formats, including call centers or even charter schools.
New Jersey is outpacing the country’s recovery in terms of industrial space, Lipper added. However, rents are still historically low. The state is also leading the country in offering incentives to developers, said Tim Comerford, senior vice president of Princeton, NJ-based Biggins Lacy, Shapiro & Co., including the Urban Transit Hub Tax Credit program, which offers credits to developments within one-half mile of transit stations. Passed in 2008, an extension of the bill was just conditionally vetoed by Gov. Chris Christie, who wants the bill to require less affordable housing.
“The government in New Jersey is actually accessible,” said Jon Meisel, managing director and suburban tri-state market director of Jones Lang LaSalle. “The UTHTC is very advantageous, but it has to be a New Jersey corporation with tax credits,” limiting it to large corporations.
That may change. A new bill that would allow 10 companies to band together rather than the current three is in the offing in the New Jersey Assembly, reported Frank Giantomasi, a partner in Genova Burns & Giantomasi, Newark. The result could be projects that build around the success of the New Jersey Performing Arts Center, creating a 24-hour atmosphere.
Newark may also benefit as residential rents increase westward from New York City – people will move from Manhattan to Hoboken to Jersey City westward eventually to Harrison and Newark in search of affordable rents.
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