John Holusha
September 24, 2000
New York Times

Office vacancies are approaching record lows and rental rates reaching record highs in Manhattan. Despite the demand, there is no speculative construction in New York City, with the few buildings that are being constructed substantially preleased before a shovel went into the ground.

Across the Hudson River along the New Jersey waterfront, buildings are being occupied as fast as they can be built as securities firms are moving one stop west of Manhattan on the PATH rail line.

The western shore of the Hudson River facing Manhattan is in the throes of development as Wall Street companies are building space for their back office operations that support the money-making front office activities that are still in Manhattan. And the buildings are filling up as fast as they can be built or renovated.

"We have no space," said Seena Stein, president of Newmark's New Jersey operations. "The vacancy rate in Class A on the waterfront is 0.2 percent, and rents are at a record high of $36.25 a square foot." Ms. Stein said anyone wanting space on the waterfront would have to wait at least a year until a construction project is finished. She said this delay has pushed some deals west to Newark, several stations away on the PATH line.

One big New York financial house that is changing the skyline in Jersey City is the Goldman Sachs Group, which purchased land in Colgate Center near the southern end of the city's waterfront across the water from the World Trade Center.

The group plans to build three structures totaling about three million square feet of space. Work is already under way on the first building, which will have about 1.3 million square feet of space.

Merrill Lynch and Chase Bank are also expanding their support operations in Jersey City, and each could eventually have thousands of employees working across the Hudson from Manhattan.

Development spread north to Hoboken this year, when the Wiley deal was signed in August. The publisher will occupy one of two SJP Properties in what is being called the Waterfront Corporate Center. The development is to include offices, retail space, a hotel and housing.

Elsewhere in New Jersey the office market is strong, but the obstacles to development are preventing any hint of overbuilding, said Donald Elseri, the director of the suburban operations of Cushman & Wakefield. In New Jersey, "you have a market of about 150 million square feet of space and maybe one to two million square feet going up," he said. "That's minuscule."

He said he hoped efforts to develop established cities like Jersey City, Hoboken and Newark represented a trend that might halt or slow the endless sprawl of development across the state. "New Jersey needs to push development where the infrastructure is -- and that is in urban areas," he said. "You just have to be creative."