When Marc Shapiro, vice chairman of the Chase Manhattan Bank, stepped out of the bank's 52-story global headquarters at 270 Park Avenue on a sunny morning last May, he still wasn't sure about moving 1,900 of his employees to the Jersey City waterfront.

The move from Manhattan would save money, but would crossing the Hudson River cause employee defections? And would it take too long for key executives to get back to the bank's midtown headquarters for meetings?

So, Shapiro decided to test the claims of Sam and Richard LeFrak, the developers who were pitching their 400-acre Newport project as the perfect location for Chase. Standing on the sidewalk, he carefully checked his watch, walked two blocks west to 47th Street and Sixth Avenue and plunged into the New York City subway system.

It would be his first visit to the Newport site.

The transfer at 33rd Street to the cross-Hudson PATH train was smooth and five stops later, Shapiro emerged from PATH's remodeled Pavonia/Newport station, walked across Washington Boulevard to the proposed office site, and checked his watch again.

Thirty-seven minutes, door-to-door.

"He knew if he needed his auditors in his office, they could get there in a reasonable amount of time," said Richard LeFrak, who was there to meet Shapiro. "That sold it."

Less than two decades ago, Jersey City's derelict waterfront was a case study in post-industrial urban neglect. The city was better known for its 19 percent poverty rate and abundance of indicted local officials than its skyline.

Even during the last development boom in the late 1980s, Jersey City was still far from a sure thing. In 1987, Chase Manhattan considered but then rejected plans to take space at Newport.

Now, so many big-name companies from New York are competing for space in the glossy new office towers going up where abandoned rail yards, factories and warehouses once stood that Jersey City has become one of the hottest real estate markets in the nation, rivaling San Francisco or Silicon Valley.

So fast is Jersey City's stock of modern corporate office space growing that it will soon eclipse Morris County as the state's largest concentration of what real estate brokers call "Class A" office space.

Over the past 18 months, Chase Manhattan, Goldman Sachs, Merrill Lynch, American Express, PaineWebber, Cigna, ISO, Datek, Knight Trading Group, Waterhouse Securities, DLJ Direct, National Discount Brokers and Lord Abbet & Co. have signed up for big blocks of space.

Others, including Morgan Stanley Dean Witter and Charles Schwab Inc., are said to be close to signing leases for buildings not yet started.

This corporate migration to what urban planners are calling "Wall Street West" has yet to spread beyond the waterfront and into the inland neighborhoods where most of Jersey City's estimated 232,400 people live -- but it is beginning to soften the city's hard urban edges. With at least 15,000 new jobs expected over the next few years, Jersey City is beginning to attract the new middle-class housing, name-brand retail stores, trendy restaurants and galleries needed to lure new residents and provide jobs for existing ones.

On one level, it's easy to understand what's happening. The cost of modern office space in Manhattan is twice what it is in Jersey City and rising steadily because of a shortage of land for new buildings. With little new space coming on the market in New York, companies like Chase Manhattan can't find the kind of modern, technology-friendly space they need to do business in the new economy.

But the surge in development also stems from a successful effort over the past 15 years by state, county and city officials to invest in the infrastructure -- such as sewage treatment plants and mass transit lines -- needed to accommodate new development.

"New York City just hasn't positioned itself to create the next generation of development sites, while Jersey City and the state of New Jersey have," said Robert Yaro, executive director of the Manhattan-based Regional Plan Association. "Jersey City is now probably the best, most convenient corporate location in the region outside of Manhattan."

The numbers provide plenty of evidence.

Since the mid-1980s, more than 6.6 million square feet of modern corporate office space -- the "Class A" space brokers talk about -- has been completed, including 101 Hudson St., which became the state's tallest building at 42 floors in 1992. That's more Class A space than exists in downtown Detroit, all of Somerset County or on the Princeton Route 1 corridor between Trenton and New Brunswick.

But figures compiled by The Star-Ledger show Jersey City is likely to more than double over the next few years, reaching 14.2 million square feet by 2004. That would give Jersey City more Class A space than exists now in downtown Atlanta or downtown Pittsburgh.

"It's achieved critical mass," said Richard LeFrak, president of the New York-based Lefrak Organization. "Now the world has finally recognized the New Jersey waterfront."

And there are no signs that Jersey City has reached a saturation point.

Two years into the current wave of construction, the vacancy rate on the waterfront is at an infinitesimal one quarter of a percent -- far below New Jersey's overall vacancy rate of just over 10 percent, according to the latest figures from Insignia/ESG, a national commercial real estate brokerage firm.

With companies like Chase Manhattan willing to sign leases for unbuilt space, construction crews are busy constructing another six buildings.

Artist's Rendering of Goldman Sachs's 30 Hudson Street

One of them, 30 Hudson St., is expected to become the state's tallest building at 875 feet, or 55 stories, according to plans filed with the city. Its owner, the Wall Street investment banking giant Goldman, Sachs & Co., said it will contain more than 1 million square feet of space and will house its investment management division.

With all 4.1 million square feet of space now under construction already spoken for, property owners such as Hartz Mountain, Mack-Cali Realty and Merrill-Lynch said in interviews they expect to break ground for as many as six more buildings within the next six to 12 months.

"Crossing the river used to be a psychological leap for people, but now that's not a big factor," said Emanuel Stern, president and CEO of Hartz Mountain Industries, one of the state's largest developers.

So many big firms are looking for space that Hartz expects to begin work soon on a 1.1 million-square-foot tower at 77 Hudson St., he said.

"The Jersey City waterfront is not a hard sell anymore. Especially since Goldman Sachs, it's been validated," said Mitchell Hersh, chief executive officer at Mack-Cali Realty in Cranford. Hersh said his company, one of the nation's largest office developers, with 28 million square feet of space across the country, expects to break ground for a 950,000-square-foot building, Plaza V, behind its Harborside building next month.

An even bigger project -- a 1.8 million-square-foot tower at Harborside, Plaza VII -- could start this year if Morgan Stanley Dean Witter, the Wall Street investment firm that already occupies 300,000 square feet at Harborside, signs on as an anchor tenant, Hersh said. "We're in discussions. I'm hopeful we can start in the near term, meaning this year," he said.

LeFrak's deal with Chase Manhattan leaves the development company with approval to build just one more building of 1 million square feet under its original master plan for Newport, but he's now seeking approvals for an additional 2 million square feet. "The market can certainly bear it," said the Queens-based developer.

The next step is getting people to live in Jersey City, not just work in one of the new glass towers.

Hersh, Stern, LeFrak and others are building thousands of luxury apartments, scores of stores and restaurants, a half-dozen hotels, new ferry terminals and a connected waterfront walkway that are beginning to turn the waterfront into a 24-hour urban neighborhood instead of a string of self-contained office towers facing the Manhattan skyline.

"The New Jersey waterfront is becoming a place of its own instead of a series of isolated outposts," Yaro, the New York-based urban planner, said. "It's becoming a place where people can live and work."

Jersey City Mayor Bret Schundler, a former Wall Street investment banker elected in 1993, likes to boast that his city led the state in job losses in the three years before he was elected but has led it in job creation since, thanks largely to development along the waterfront.

But he said that while all the new development has helped the city's tax base, it hasn't made up for cuts in state aid over the last decade. "People in Trenton look at all the development on the waterfront and think we don't need help any more, but that's not true. We're still an old city with a high debt level," he said. "For instance, we haven't been able to do any road resurfacing for a year."

That hasn't discouraged companies contemplating a move across the river. What get their attention is the hard economic fact that renting office space -- not to mention apartments or hotel rooms -- costs more than double what comparable space costs in Jersey City.

Bruce Rothman, a top commercial real estate broker in Manhattan, said it's getting to the point that companies are having to justify the high cost of remaining in the city.

"When companies decide to stay in New York, it's more than a business decision. It's a lifestyle and image decision," said Rothman, who is managing director of the midtown Manhattan office of Julian J. Studley Inc., a major New York-based commercial real estate brokerage firm.

The high demand and short supply of Class A space in Manhattan has driven annual rental rates sharply upward. Where tenants might have paid $ 40 to $ 50 a square foot in prime Midtown locations two or three years ago, landlords are getting $ 95 to $ 110 for the same space today, Rothman said.

That makes it attractive to move to Jersey City, where rents are well below $ 40 per square foot, he said. "Not only can they get the space they need at half the cost, but they can get it built to suit," he said.

Edwin Cohen, a broker with Cushman & Wakefield who's been leasing space on the waterfront for more than a decade, said cheaper rent is just part of the attraction. He said electric rates, sales taxes and corporate and personal income taxes are all significantly lower on this side of the river.

The case for crossing the Hudson is even more compelling for companies seeking the large unobstructed floor plans -- an acre or more without columns -- and high-tech wiring required to support today's networked corporate office workers.

"A large user looking for, say, 250,000 to 500,000 square feet of space like that is going to have a very hard time finding it in New York," Rothman said.

Some planners say New York has been its own worst enemy, doing little to accommodate growth.

"The city just hasn't positioned itself to create the next generation of development sites while Jersey City and the state of New Jersey have," Yaro said. The result, he said, is that "Jersey City is now probably the best, most convenient corporate location in the region outside of Manhattan."

Over the past 15 years officials in Jersey City and Hudson County approved clear development plans for the waterfront and put in needed sewer improvements to accommodate development. At the same time, NJ Transit, the state's bus and rail agency, planned and invested in a $ 1.1 billion light rail trolley line designed to tie the new development together and link it to the state's existing rail system.

The first leg of the 20-mile north-south light rail line from Bayonne opened earlier this year, reaching the Exchange Place, where much of the current construction is centered. Service is to be extended to Newport and the rest of the city's waterfront development sites before Christmas.

"...Magic Carpet Made Of Steel."

"That's the first new mass transit capacity built in the region in years," Yaro said. "In New York, they're just now getting around to planning any new capacity such as a new Second Avenue subway."

Yaro said city officials, including a task force formed by Sen. Charles Schumer (D-NY), are trying to promote development in three main areas: Long Island City in Queens, downtown Brooklyn, including the Brooklyn waterfront, and the far west side of Manhattan.

But, he said, none has mass transit access comparable to Jersey City or Hoboken, which recently joined the waterfront office boom with the announcement that John Wiley & Sons, the publishing firm, will move its headquarters and 800 jobs from midtown Manhattan to a new 550,000 building for which ground will be broken later this year.

Even if New York does get its act together in the future, the size of the Manhattan market -- 176 million square feet of Class A space -- means the overflow demand will be more than enough to keep the Hudson waterfront growing, Yaro said. "From our perspective, which side of the Hudson they're on doesn't matter. What's important is that they stay in the region."

As development transforms Jersey City's waterfront, what will its effects be on the residents of New Jersey's second-largest city, most of whom neither live nor work within sight of the river?

"It's good for the city and the state that this new skyline is emerging. I can't think of city that's more exciting to live in right now than Jersey City, but it requires leadership and vision to make sure the energy spreads to all parts of the city," said Carlos Hernandez, president of New Jersey City University, formerly Jersey City State College, and a 19-year resident of the city.

Hernandez, who holds a doctorate in environmental psychology and did his thesis on how people relate to their surroundings, said the benefits of the kind of economic development going on along the waterfront won't spread to the rest of the city without hard work on the part of business, political and community leaders.

"It never happens automatically," he said, "and when it doesn't happen what you get is the haves versus the have-nots."

Will that be the case in Jersey City?

"I'm hopeful. The mayor does a good job of communicating a vision of what the city could become, but it's too early to tell," Hernandez said. "One of my biggest fears is that people have an exaggerated expectation of what this development will produce. If they think it alone will save the city, then we will fail."