Full NJ waterfront sparks interest in Newark

Real Estate Weekly, Sept 1, 1999 by Seena Stein

Now that there's hardly enough existing vacant office space to accommodate a mouse along the New Jersey waterfront, we're seeing two phenomena that can only mean great news to the real estate industry.

First, new office markets are heating up. Farther along the PATH line in Newark, the Gateway project is stirring a lot of interest, and neighborhoods in Newark that were once not even considered renewable office locations have become very desirable again. Second, the brisk business in the office segment along the waterfront has led to new developments in residential and retail real estate in that marketplace.

In Newark, the excitement is building to a roar, thanks largely to the confidence of several big-name investors, which in turn is attributable in great part to the efforts of community-improvement organizations like the New Newark Foundation.

The latest big deal in Newark was the purchase by Tishman Speyer and Gale & Wentworth of three of the four Gateway buildings: 1.3 million square feet of downtown office property. Tishman Speyer is also expected to bid on the fourth building in the Gateway complex (the 824,000-square-foot Gateway Two), and rumor has it, on the new arena for the New Jersey Nets, the NBA basketball team, which everyone expects will end up playing in Newark. It's the ideal location.

The easy access to New York City and great common benefits are partly responsible for the increased retail and residential activity along the waterfront in Weehawken, Hoboken and Jersey City, as well as for the resurgence of Newark. Logistically, Newark has always been a natural "second banana" to New York City, with its excellent PATH and New Jersey Transit service, buses to every section of the state and to New York, its own subway system, and one of the country's largest international airports. Look for Newark's Class A and B office space to disappear quickly, and look for new retail and residential developments to follow there.

The next big news will come out of the Newark Airport area, to the east of Downtown Newark, as the development pattern continues to flow towards the airport. Plots of land along the new light rail system that will connect Newark Airport with Downtown Newark will be particularly tempting to developers.

The demand for waterfront office property, meanwhile, is not likely to slacken. Two speculative buildings, to be completed this fall, will bring nearly 900,000 square feet of new space into the market, but that space is 100 percent committed. Another one has broken ground at Newport, and Hartz expects to start construction on another on September 1. We expect both buildings to be virtually 100 percent committed by year's end. Finally, there's an old industrial building at the Colgate site, which SJP Properties is rehabilitating. It too will be committed by mid-fall.

Common sense tells us that the market must turn down at some time, but there's precious little sign of that happening so far.