Hudson Waterfront Draws Interest From Institutional Investors

The demand for office space is New Jersey is considered “tepid” in a report by Cassidy Turley.

The Northern New Jersey office market ended the third quarter with a vacancy rate of 14.5 percent, a slight increase from the end of the second quarter. Office-market activity slowed in the third quarter, resulting in 339,408 square feet of negative absorption. Class B office space continues to account for the majority of negative absorption in the market, representing 92 percent of this quarter’s negative demand.

The “flight to quality” trend demonstrates that tenants are taking advantage of opportunities to upgrade to high-quality buildings with more amenities while maintaining their bottom line. Cassidy Turley reported, “Overall, demand in Northern New Jersey will struggle to gain meaningful momentum until there is a significant improvement with unemployment and job creation.”

Although many submarkets are struggling with higher vacancies, the Hudson Waterfront submarket continues to lead office-market activity with 120,344 feet of position absorption for the quarter, and 324,971 square feet year to date.

With the lowest vacancy rate in Northern New Jersey, the Hudson Waterfront remains an attractive alternative location for New York companies looking to lower operation costs while maintaining optimum community accessibility.

The low office-vacancy rate coupled with high-credit tenancy has made the Hudson Waterfront office properties highly desirable to institutional investors.

Last month, Brookfield Office Properties sold the 36-story, 1.1-million-square-foot Class A office building Newport Tower, located on the Hudson River in Jersey City. The property was sold to Multi-Employer Property Trust (MEPT), a real estate equity fund with over $5.31 billion of net assets, for a purchase price of $377.5 million, or $343 per square foot. It is the largest single office-asset transaction in the history of New Jersey.

In August, Gaia Real Estate Investments partnered with Israeli firms Phoenix Insurance and Mivtachim Insurance to purchase 2 Journal Square in Jersey City. The joint venture paid $78 million, or about $240 per square foot, for the nine-story, 324,912-square-foot Class A building to Hartz Mountain Industries.

In April, CBRE Realty Trust acquired the 827,318-square-foot office property at 70 and 90 Hudson Street in Jersey City, paying $310 million, or approximately $375 per square foot, to Hartz Mountain Industries. At the time of the sale, the deal was the third-largest office transaction in the state history.

Residential property in Jersey City is a sought-after asset by investors. In January of this year, J.P. Morgan Investment Management purchased Liberty Towers, two 37-story residential rental buildings in Jersey City, completed in 2003 with a total of 650 apartments. The sellers were a joint venture of Fisher Development and Northwestern Mutual Investment Management, which paid approximately $280 million, or $431,000 per apartment unit.
mstoler@madisonrealtycapital.com

Michael Stoler is a managing director at Madison Realty Capital and president of New York Real Estate TV LLC.