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Hail rail: Cities ride trains to rebound [NJBIZ (NJ)](NJBIZ (NJ) Via Acquire Media NewsEdge) Transit hubs lead office real estate recovery as tenants seek transportation access NEW JERSEY'S transit hubs are bright spots in an otherwise lackluster offi ce market, driving an increasing percentage of the stateâeuro(TM)s leasing and development activity as companies and builders invest in these locations over other suburban areas. Transit hubs âeurooehave gotten a lot more traction than the rest of the marketplace,âeuro? said Jonathan Meisel , New Jersey markets director at Jones Lang LaSalle , a commercial real estate services fi rm that issued its fi rst New Jersey transit hub report last month. Transit hubs outperformed the rest of the stateâeuro(TM)s offi ce market, with an overall vacancy rate of 14.7 percent and an average asking rental rate of about $27.43, according to the report, which included the nine qualifying cities under the stateâeuro(TM)s Urban Transit Hub tax credit program, as well as the transit villages of Morristown and Metropark (which covers parts of Edison and Woodbridge), in its assessment. By comparison, the suburban New Jersey market had a 29.7 percent overall vacancy rate, and an average asking rent of $23.51, the report said. Prior to 2009, transit hubs accounted for about 15 percent of all leasing activity in the state, but in the past two years, thatâeuro(TM)s increased to more than 20 percent, according to the report. The location of more companies in transit hubs is very likely to drive new construction in these markets over the next few years, whereas âeurooeitâeuro(TM)s a harder argument in the suburbs,âeuro? Meisel said. âeurooeThereâeuro(TM)s been a shift and focus toward transit hubs." Aside from build-to-suit projects, âeurooethere will not be suburban speculative development of any magnitude over the next several years, due to sparse demand and lack of fi nancing availability,âeuro? said Mitchell Hersh , CEO of Mack-Cali Realty Corp. , a real estate investment trust based in the transit hub of Metropark. Mack-Cali plans to pursue development opportunities at its Harborside Financial Center offi ce complex in Jersey City, and potentially other transit hubs, though âeurooesignifi cant pre-leasing will be required in all instances,âeuro? he said. âeurooeItâeuro(TM)s great to see that the real estate community has begun to recognize, and is focusing so much new investment, on these locations,âeuro? said Martin E. Robins , director emeritus at the Alan M. Voorhees Transportation Center at Rutgers University, in New Brunswick. âeurooeWeâeuro(TM)ve only begun to scratch the surface of this.âeuro? Newark, for example, has many vacant or surface parking lots around its train stations that could be the site of new investment, while Jersey City and Hoboken also have land available. William Oâeuro(TM)Dea , deputy executive director at Elizabeth Development Corp. , said there are four signifi cant sites near its two train stations that each could house up to half a million square feet of offi ce space. But itâeuro(TM)s not a level playing fi eld for all transit hubs, he said. "Certain areas, over a certain number of decades, have developed millions of square feet of offi ce space that gives them an advantage on very large users,âeuro? he said. A challenge for Elizabeth, he said, is it has no Class A properties. But the city is preparing to market the sites, and hopes to be able to attract two 200,000-square-foot tenants that together would allow a project to qualify for Urban Transit Hub tax credits, he said. Accessibility is another issue, as the transit hubs closest to Manhattan âeuro? Jersey City and Hoboken âeuro? have the edge in attracting tenants looking to locate their back-offi ce operations close to New York, he said. The incentives available in many transit hubs âeuro? such as Urban Enterprise Zone benefi ts that provide tax savings to businesses âeuro? can only go so far, Oâeuro(TM)Dea said. âeurooeA business canâeuro(TM)t relocate just because of incentives if a site doesnâeuro(TM)t work,âeuro? he said. Still, with the Urban Transit Hub tax credit program expected to sunset in 2013, âeurooemost of the major players will be out there, marketing potential sites that we have.âeuro? Andrea Sussman , managing member of Nexus Properties , however, said incentives such as the Urban Transit Hub credits and payment-in-lieu-of-taxes agreements have been the most signifi cant factor in attracting more activity. âeurooeThat is the only reason companies are coming to transit hubs,âeuro? particularly those in urban locations in need of redevelopment, she said. Companies have a preference for suburban campuses because they âeurooelike everything to be clean and new âeuro* without incentives, they wouldnâeuro(TM)t be comingâeuro? to transit hubs. The Lawrenceville-based developer is fi nalizing plans for the last phase of Station Plaza, a mixed-use project located across from the Trenton train station; the fi nal phase will consist of two 20-story buildings totaling 1 million square feet, with 100 apartments, 30,000 feet of retail and a 2,400-car parking garage. Parsippany-based SJP Properties and Cranburyâeuro(TM)s Matrix Development Corp. , two top developers who together are building a new headquarters building for Panasonic Corp. âeuro? which was awarded $102 million in Urban Transit Hub tax credits earlier this year to relocate to Newark from Secaucus âeuro? both declined to comment for this story. One threat to development at transit hubs is the funding cuts to the Department of Transportationâeuro(TM)s Transit Village and other transit-friendly development programs, Robins said. âeurooeThat line item really helps maintain interest and municipal planning capacity to deal with these sites, and to make them more and more attractive to private developers,âeuro? he said. âeurooeIf municipalities are provided no carrots along these lines, nothing is going to happen, and development wonâeuro(TM)t come.âeuro? William Oâeuro(TM)Dea, deputy executive director at Elizabeth Development Corp. , says Elizabeth faces a challenge as a transit hub because it has no Class A properties to market. Still, he hopes the city can attract two 200,000-square-foot tenants that would qualify for tax credits under the Urban Transit Hub program. E-mail to: [email protected] (c) 2011 Journal Publications Inc. |