Deloitte’s application for more than $35 million in incentives from New Jersey could legitimately be viewed as merely an attempt to acquire bargaining leverage with Manhattan landlords, or as part of Deloitte’s exhaustive exploration of its options.
Even so, Mr. Murphy, who spent much of his career in New Jersey, said, “It starts as leverage at first. But when you start looking at some of these incentives that Jersey is offering, it becomes incredibly compelling very quickly.”
As do the rents.
“With new construction in Hoboken, a tenant from New York starts out saying, ‘Well, my rent in midtown is $65 [a square foot], downtown it’s $45’; but in Hoboken, they can be essentially $20 for brand-new space,” Mr. Murphy said. “I do think the border war will pick up steam as more demand hits the market, and we’ll see more people looking at how they can reduce cost and take advantage of not just the workforce in Manhattan that can commute to New Jersey, but also the six million people who live in northern and central New Jersey.”
Jonathan Gandal, a Deloitte spokesman, said in an emailed statement that the application for incentives was merely “preliminary research of the tri-state area commercial real estate market in advance of our expiring leases in New York, New Jersey and Connecticut. The New Jersey grants are available to us, but no decisions have been made. Tax incentives are one of multiple factors we’re weighing.”
In September, yet another company with large Manhattan offices was approved for incentives by New Jersey’s Economic Development Authority (companies do not receive the incentives unless they actually move). Insurance firm ACE Limited, currently with offices at 1133 Avenue of the Americas, 140 Broadway and 1325 Avenue of the Americas, was tentatively awarded $9 million to relocate and create 336 jobs in New Jersey. The firm is said to be working with Jones Lang LaSalle to find a sizable chunk of office space.
This is the type of action that leads New Jersey officials to boast about the subsidies they offer, incentives that New York officials freely acknowledge are far more generous than what most companies can receive in the city.
In 2008, on its relocation subsidy program alone-the Business Employment Incentive Program-New Jersey signed agreements to give out more than $130 million in incentives, an amount that comes on top of tens of millions poured into numerous other incentives aimed at attracting new companies to move a few miles west. The BEIP program is income-based, and thus gives more money to companies with higher wages.
“It’s a spectacular deal for us,” said Jerry Zaro, Governor Corzine’s economic development czar. “We give no money out to anyone who doesn’t show a net positive economic benefit to the state.”
Such rhetoric irritates many New York business groups and landlords eager to match New Jersey’s subsidy play. Particularly in Lower Manhattan, the state and city have been liberal in awarding tax benefits to companies that relocate or expand, but generally speaking, the subsidies still don’t compare, and the cost of rent is tremendously lower outside of Manhattan.
“Right now, New York doesn’t make the short list on where to expand or put back-office jobs,” said Kathryn Wylde, president of the Partnership for New York City, a leading business group. Ms. Wylde is urging a plan to rival the BEIP program, one that would give an income tax credit to employers that relocate or expand in New York.
Brookfield Properties, which now houses much of Deloitte’s operations, said in a statement that it supports more such incentives.