Financial Times
London
Friday , August 18, 2000

By JOHN LABATE

Jersey City has all the markings of a robust boomtown, including an odd lack of things taken for granted in other cities.

Near the busy Exchange Place railway station, for instance, there are no street signs and few building numbers, making the job of finding one of the many financial or internet firms in the area a chore. (The business visitor is well advised to pack a cellphone.)

But such small annoyances take little away from the fact that Jersey City is one of the strongest commercial property markets in the New York metropolitan area.

By now the success of Jersey City as a magnet for major financial services firms is well established. Situated on the west bank of the Hudson River across from lower Manhattan, the region has attracted key operating divisions of Merrill Lynch, American Express, PaineWebber and many others.

Recently Chase Manhattan, the US bank, broke ground on a set of new buildings to go up in the next 18 months -- 1.1m sq ft of new office space to house 1,900 Chase employees and several hundred consultants.

Jersey City has three main business centres. The most established is the Newport Centre, at the northern end of town, which is dominated by developer Samuel J. Le Frak, whose family owns 600 acres in the area. Newport is home to four business towers and there are two more in the works.

The other main commercial centres include Exchange Place, where Goldman Sachs recently announced plans to build a 45-storey tower to contain 2m sq ft on the site of a former Colgate toothpaste factory. Two other developers in the area are Hartz Mountain and Mack-Cali, a real estate investment trust that has built 1.9m sq ft including three office towers in the Harbourside section of town.

While office rents in the area are high for northern New Jersey -- about Dollars 35 (Pounds 23) per sq ft -- they remain far below the Dollars 75 going rates in midtown Manhattan.

Jersey-based companies also avoid New York's occupancy tax, cut recently to 6 per cent. And Jersey City still offers companies the ability to do something they can do less and less often in Manhattan -- build from the ground up. That is a key advantage for companies in search of design specifics such as column-free office spaces or IT-friendly power supplies.

"Because all these financial firms rely on technology, the kind of buildings they need and the amenities they require make existing New York product difficult to transform," said Thomas Gallagher, chief of staff for Bret Schundler, Jersey City's mayor.

Its proximity to New York is one of the keys to Jersey City's success. Promoters of the area refer to it as New York's sixth borough or Manhattan's west bank. The New Jersey trains connect Jersey City to Manhattan in a five-minute trip, a necessary feature for companies with a sprawling number of buildings on both sides of the River Hudson.

Or as one banker put it: "It means never having to sit in that terrible tunnel again."

The tunnel is the Holland road tunnel, the artery famous for bumper-to-bumper delays and as a general blight to the many New Jersey residents who make their living in New York.

What has changed in recent years is the type of office relocations to Jersey City. At one time it was thought that the migration to Jersey City consisted of "back office" operations but that has changed.

When the Goldman Sachs expansion takes hold, on a site once occupied by a Colgate factory, it will be home to the investment banker's white-collar investment management and mutual funds groups.

In January, Lord Abbott made waves by relocating its entire operation from the General Motors building on 5th Avenue to Exchange Place in Jersey City. Similarly, ISO Insurance is in the process of relocating its entire operations from Manhattan to a 392,000 sq ft, 22-storey building in Jersey City.

In addition, Jersey City has become home to a series of market trading firms, including DLJdirect and National Discount Brokers, and key marketmaking firms such as Knight Trading, Schwab Capital Markets, and Herzog, Heine, Geduld, which is in the process of being acquired by Merrill Lynch.

The current property boom has been white hot since 1998 after a long, dry spell in new commercial construction came to an end. Since then it has been a scramble as more and more companies have looked to expand westward.

"Within a period of about two years you had 2.4m sq ft of space fully leased, which is quite dramatic," said Edwin H. Cohen, executive director at Cushman Wakefield, the global real estate services firm.

"Areas along the Jersey waterfront have literally been torn down and built up again. The residential market is exploding as well.

"The region was hit in the early 1990s by the last recession, which all but snuffed out a smaller property boom from the 1980s, according to Mr Cohen.

Now, however, the region is well braced for the next downturn and the current Manhattan migration shows few signs of slowing. The next phase of Jersey City's growth is likely to come in the hotel and residential markets.

In the downtown section of town the city is planning multi-family buildings with apartments and condominiums that will house nearly 3,000 families.