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JERSEY CITY-Although the weakening economy and anemic job growth has resulted in increasing vacancies in many areas, Jersey City and Hoboken have remained relatively strong, according to Craig Eisenhardt, senior vice president with CB Richard Ellis. “As the New York [City] market has continued to tighten and rents have continued to escalate in New York [City], Jersey City and Hoboken have acted as a release valve for firms that can’t compete in New York or can’t afford to stay,” he tells GlobeSt.com. “The two cities have served as good opportunities for firms to trade down in price but not in quality of space.”

As Eisenhardt points out, a large part of the two cities’ appeal, besides the more favorable rental rates, is access to Manhattan. Ferry services and PATH trains allow workers to move easily between New York City and New Jersey. In addition, both cities offer relatively new, high-quality class A office buildings, often right on the waterfront or near PATH stations. The most popular buildings include Waterfront Corporate Center in Hoboken and Newport Office Center, Harborside Financial Center and Exchange Place in Jersey City. These offices benefit not only from their close proximity to mass transit, but also from the fact that they all either include or are located near retail, restaurants and hotels, ensuring that their neighborhoods are vibrant and active at all hours of the day.

“You really have to offer something besides just a discounted office rental rate,” says Eisenhardt. “You have to give a quality environment for tenants’ employees.”Those quality environments have already drawn several companies across the river, including Arch Insurance, which took more than 100,000 sf at Harborside Financial Center and Axa, which filled almost 250,000 sf at Newport Tower. In addition, Tullet Prebon expanded its space by more than 50%, to 100,759 sf at 101 Hudson St. in Jersey City.

Second quarter results for Northern New Jersey have not painted the rosiest picture, but the market is certainly nowhere near collapse. The Hudson Waterfront, the largest market by far at more than 18 million sf, reported a vacancy rate of 9%, according to Grubb & Ellis’s quarterly market report. This is the lowest vacancy in all 12 Northern New Jersey submarkets. The market did record a negative absorption of about 270,000 sf, possibly due to financial services firms cutting back on their workforce and subleasing space. Overall net absorption stands at just over 100,000 sf for the year, however, and average asking rents remain the highest for all the northern submarkets, with an average of $34.51 per sf for class A space.

Although the waterfront markets have had a slightly rocky quarter, Eisenhardt remains optimistic that Jersey City and Hoboken will safely ride out the economic downturn. “The fundamentals are there for the market to continue to be very stable,” he says. “The fact is, there’s just not a lot of space available these days. The wild card would be if a few large financial services firms started to put sublease space on the market. We’ve already seen a little of that, and some of that space has already been absorbed, so even if the availability rate goes up a little, we’re still at such a point where the market should be able to withstand the downturn, even it it’s prolonged. It’s still a great place to put people and put operations, because the reality is, even if New York [City] softens up and the pricing comes down and the New York/New Jersey spread closes a bit, the spread will still be so huge that New Jersey will still be a very attractive option.”

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