By Joshua Burd
Spread across four projects, the city currently has 450 housing units under construction in the blocks surrounding its downtown, said Lyneir Richardson, CEO of the Brick City Development Corp. That will give the downtown “zone” about 2,000 total units, he said, but several other planned or proposed projects could bring that total to at least 3,000 by 2017.
Such efforts to add market-rate housing go hand in hand with new retail amenities, Richardson said. He ticked off a list of new and ongoing projects, including Dinosaur Bar-B-Que and the planned Joe’s Crab Shack in the new Courtyard by Marriott, located a block from the Prudential Center.
“The next phase of Newark is about getting more people living and working downtown,” Richardson said. By 2017, the city aims to have 5,000 new residents and another 5,000 new people working around its central business district.
Kate Coburn, a partner with the New York-based consultancy HR&A Advisors Inc., said the arrival of chains like Joe’s Crab Shack and Starbucks inside the hotel signal that Newark is attracting a new generation of retailers beyond local businesses. But as the city builds a new retail base, developers must be careful to balance those new tenants with local merchants, who “make a project closer to the heart of the people that are there.”
A key template for diversifying downtown Newark will be the $150 million Teachers Village project, which includes three charter schools, more than 200 apartments and 70,000 square feet of retail along Halsey Street. Ron Beit, the project’s lead developer, said builders in Newark have “looked at plans around the country and around the world, and see what has worked and what hasn’t worked in the last several decades.”
“The one thing that is clear is (that) to have a 24-hour, seven-day community, you need all three food groups of real estate,” Beit said, citing residential, commercial and retail. He said Teachers Village is using its schools as its commercial component, helping to activate the neighborhood, “so that overnight, you have this sustainable community.”
Across all property classes, Newark and its host of development projects have been among the chief beneficiaries of state incentive programs, said Michele Brown, CEO of the Economic Development Authority. Under just the Urban Transit Hub program, the state’s largest incentive, projects in the city have been awarded future tax credits totaling more than $450 million.
But the EDA’s arsenal of incentives could be in line for a change, said Ted Zangari, the lead redevelopment attorney for Newark-based Sills, Cummis & Gross PC. He noted that Urban Transit Hub, its Grow New Jersey offshoot and two other programs would be refined and consolidated under a bill he expected to move through the Legislature starting next week.
Zangari said he “would like to think this bill will be on the governor’s desk” by March 31. If signed, the law would replenish the state’s offerings to businesses and give the state a “single program to market for that 20-second elevator pitch,” similar to New York and Pennsylvania, he said.
The largest Urban Transit Hub recipient, Prudential Financial’s planned office complex alongside Military Park, also was a key topic at the event. Heidi Learner, the chief economist at Studley Inc., said Prudential currently accounts for five of the 12 largest office users in a market that has seen little rent growth and trailed other urban centers in recouping “office-using jobs.”
If the firm vacates its current space for the new 740,000-square-foot complex, Newark’s office availability rate would increase from 19.4 percent to above 25 percent, she said, noting that office availability is at 17.4 percent nationally and 15 percent in downtown Manhattan.
But Jon Meisel, a managing director with Jones Lang LaSalle’s New Jersey offices, seemed to for expanding the city’s office market, noting that Newark’s class A vacancy rate is the lowest in the state, and that 45 percent of its office stock was built before 1970. What’s more, the new Prudential office would join projects like Teachers Village in “tying in” the city’s higher education institutions to the downtown.
“Now you’ve created a new enclave,” Meisel said. “You’re starting to clean up the whole area behind Broad Street, right by Military Park. … All of a sudden you’re coming out of the central core, and that’s what spurs development.”
Everyone knows there’s no crystal ball to give you predictions for the coming year. So, yeah, you kinda wasted that money at the Shore.
But we’ve got the next best thing: Experts. They’re never wrong, right?
As we turn to 2014, we reached out to a dozen real estate insiders to get their take on the new year:
Adam Altman, managing member of KABR Real Estate Investment Partners (Ridgefield Park)
“The multifamily and industrial markets have been strong for a few years to the point where most of the returns and opportunity have been squeezed out of the assets. In 2014, the market will show continued improvement in office and retail space in buildings that have strong sponsorship. In addition, urban transit hubs will continue to be a choice destination for development of multifamily and retail properties.”
Todd Anderson, principal at The Hampshire Cos. (Morristown)
“We anticipate a surge of sustainable activity surrounding the port area in 2014 that will result from the expansion of the port and the raising of the Bayonne Bridge to accommodate the new giant Panamax container ships that will navigate the widened Panama Canal. We can expect to see a revitalization of the port area and anticipate the announcement of several new construction projects to accommodate the increased flow of goods that will be coming through the port.”
Martin Dowd, office leasing and urban redevelopment attorney at McCarter & English (Newark)
“Because incentives under the Economic Opportunity Act lower the effective cost of occupancy of office space, I foresee some absorption by new business coming to the state, mostly from multistate operations moving some functions here, rather than wholesale moves of entire companies from other states. Meanwhile, Newark’s landscape will be in flux, with Prudential’s move creating 700,000 additional square feet of office vacancy, pressuring rents throughout downtown and possibly leading to distress for all but the highest quality properties.”
Steven Fulop, mayor (Jersey City)
“Jersey City is not just a waterfront mecca. We are incentivizing development throughout the entire city as evidenced by what is taking place in Journal Square, where we will soon break ground for the first time in 40 years on two residential towers and will see the restoration of the Loew’s Theatre.”
Frank Giantomasi, partner at Genova Burns Giantomasi Webster (Newark)
“I think we’re going to see several noticeable surges, both in our urban centers and in the suburbs. Hoboken, Jersey City and Newark are going to be hot spots, with Hoboken and Jersey City seeing the lion’s share of new commercial office and hotel construction due to the exodus from Wall Street and New Jersey’s rising appeal to tourists. Businesses will continue to flock to Newark, too, given the recent incentives legislation, and I predict at least one new Fortune 500 company will announce that it’s coming to the Brick City in 2014.”
Jeff Hipschman, senior managing director at CBRE New Jersey (Saddle Brook)
“New Jersey office markets will continue to slowly strengthen as legacy facilities are repositioned and corporate space users continue to focus on highly efficient workplace strategies driving redevelopment and new construction. The administration’s focus on attracting and retaining business through the new GROW program will be instrumental in fostering additional job growth in the state and will further improve demand for office product.”
Brent Jenkins, vice president at LCOR (New York)
“We will continue to see a trend in New Jersey toward the development of urban infill and transit-oriented locations throughout the state. With the cost of commuting continually on the rise, people are looking to live and work in places where they can shed a car or two while, at the same time, improving their quality of life. In addition, people want to have experiential, unique retail right outside their door. The continued adoption by many of an urban or near-urban, transit-oriented work-live culture in places like Montclair, Hoboken and Jersey City will continue to feed this trend.”
Bob Klausner, partner at Fox Rothschild (Morristown)
“I believe leasing activity will be more robust in 2014 than in 2013 (not a bold prediction based on the 2013 market). I also believe that, as the year progresses, we may actually start seeing a slight increase in rents for office inventory for the first time in many years. Assuming interest rates stay at recent levels, I expect an active market for sales and dispositions and in refinancing. Rental housing market will continue to be strong, with a slight uptick in the ‘for sale’ market.”
Adam Mermelstein, managing member at Treetop Development (Teaneck)
“2014 will be a stable year in multifamily real estate. With interest rates currently at bay — though the risk and fear of an uptick is still prevalent, as well as double-digit rent growth in NYC and historic sales prices — I do not see further upward momentum, but rather a stabilization at these current levels.”
Michael G. McGuinness, CEO of NAIOP New Jersey (New Brunswick)
“Transportation infrastructure upgrades and improvements will accelerate as if they are ‘on steroids,’ and those projects will bring new life, construction jobs and near-gridlock after Super Bowl XLVIII. New Jersey’s changing demographics will awaken towns to the need to get creative and serious about attracting ‘Millennials’ by transforming aging, obsolete office space into vibrant mixed-use environments.”
Sam Morreale, managing partner and chief investment officer, Vision Real Estate Partners LLC (Mountain Lakes)
“In a trend that will continue to gain momentum in 2014, New Jersey communities are becoming more receptive to redevelopment initiatives that create live-work-play environments. They are recognizing this approach as a viable way to attract and retain millennial generation employees, who place great value in work life balance. Multiple Rutgers University reports and real-world experience within the local development community underscore the benefit of these types of projects — especially in terms of regaining the state’s competitive positioning, both regionally and nationally.”
Andrew J. Merin, vice chairman, Cushman & Wakefield, Metropolitan Area Capital Markets Group (East Rutherford)
“With the removal of the uncertainty caused by the budget debate, we expect 2014 to be an excellent year in real estate. With the exception of multifamily development, there has been constraint in development and increasing improvement in fundamentals. Considerable equity is emerging from all sectors including foreign investment. The only outstanding issue would appear to be potential increases in interest rate. All in all, 2014 should be an excellent year for real estate.”
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