On the Waterfront, the Bidding Wars are Over--for Now

But like everywhere else, today's Hudson waterfront market, which also includes towns like Hoboken and Weehawken, continues to reflect the economic slowdown. "During the past year, inventory has grown by another 2.5 million sf, while bidding wars for new space are rare," according to Edwin H. Cohen, executive director of Cushman & Wakefield of NJ, East Rutherford.

"At the same time," he continues, "the market continues as the strongest in the state. While the vacancy rate is up from virtually nothing last year, it still remained a fairly healthy 10.9% at the end of the third quarter of 2002. The bulk of today's 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 Mack-Cali'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, observers say, is that tenant demand still exists. Instinet recently subleased 144,000 sf, for example, and Mizuho Bank subleased 107,000 sf at Harborside Plaza X in Jersey City. Cushman & Wakefield continues to market the rest of the 575,000-sf building for Charles Schwab, which leased the whole thing but has never occupied it. On the downside, Merrill Lynch has announced that it's vacating a big block of space at Trizec Properties' one million-sf Newport Tower.

"We've seen proposals for headquarters and back-office requirements of about one million sf from several tenants looking at the waterfront, including a publishing company and several financial firms," according to Cohen. "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, we're 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 scheduled for completion next year.

"The bottom line remains that the waterfront is one of the most dynamic markets in the New York metropolitan region," Cohen says. "Every company considering a relocation from Manhattan, and those coming into the New York area for the first time, look at Jersey City. With some eight million sf leased there in the past four years, it has emerged as a primary market.

"While the short-term impact of the economic downturn is evident as developers cut back on new construction plans and landlords exercise increased flexibility during lease negotiations," Cohen concludes, "the long-term outlook is strong. All indicators say that the market will come back with renewed momentum and continue its evolution as an attractive office hub."