Prospects for N.Y. to N.J. office migration unclear
Developer for Edison train project confident N.Y.C. firms will relocate
BY CHRIS GAETANO Staff Writer

EDISON- Getting Manhattan-based firms to relocate offices to Edison might be a difficult proposition if certain real estate analysts are to be believed, though attracting commuters who work in the city might not be as difficult.

David Houston, president of the firm Colliers Houston and Co., a commercial real estate consulting firm, stated that contrary to what expectations had been, New York-based firms are not relocating to New Jersey in large-enough numbers to constitute a trend, and he did not anticipate this to change.

GilMedina, executive managing director of Cushman and Wakefield of New Jersey and former state commerce secretary, meanwhile, said that while there has been some relocation into New Jersey from the city, most of it has been centered around towns along the waterfront. He, however, in disagreement with Houston, believed that the future prospects of the market had potential.

These views contrast heavily in Houston's case and slightly in Medina's case with the vision articulated by developer Steve Goldin during an interview Feb. 26.

Goldin, the chairman and CEO of the firm InterCap Holdings, had previously outlined his plans for a 44-acre plot of land near the Edison Train Station: a mixed-use village, the composition of which he said would spring almost entirely from input from the community through a series of forums and workshops. At the moment, the project is in its beginning stages, and ideas are still being sought from Edison residents, though Goldin mentioned that he anticipated there to be, among other things, stores, restaurants and office buildings.

Over the course of the conversation, Goldin mentioned that he expected companies based out of New York to be eager to relocate their offices to buildings in places such as Edison for reasons such as cheaper rent, larger spaces and newer, more modern buildings, as well as easy access to mass transportation.

"You got all these tenants [in Manhattan], their leases are expiring, they're looking at double rents if they stay over, there's nowhere to go, so they're saying: You know what? We need to start looking at New Jersey, but specifically along the train line," said Goldin.

Houston disagrees with this. While he admits that, yes, rents are much more expensive and buildings are, indeed, older and smaller inManhattan, he said that the appeal of the city is strong enough to overcome these disadvantages in the market.

"People in New York are there because that's where they want to be. New York is always going to be more expensive than New Jersey, it's always had more older buildings.…The fact of the matter is, the people in New York are not in New York for reasons having to do with costs of space. If it was, the city could be a ghost town," said Houston.

He said that in the past three years, vacant office space in Manhattan has gone down significantly, while New Jersey's vacant office space has remained, more or less, set at 32 million square feet. Houston also said that people from New Jersey fill 89 percent of new jobs in Manhattan. These two pieces of information, he said, are indicative that the trend is actually going from New Jersey to New York, rather than the other way around.

Medina, however, said that there has been movement from New York to New Jersey, citing companies moving to Jersey City as an example. His firm has listed at least 12 Manhattan-based companies as either relocating or setting up separate offices in Jersey City, including Citco Fund Services, Deutsche Bank and Northern Trust.

"A lot of development groups in New Jersey have expressed surprise that the volume of migration hasn't been larger. Part of it is that migration has been confined, to some extent, to the waterfront. There's been some activity in different towns in New Jersey, but the migration has been largely concentrated in the Jersey City waterfront area," said Medina.

Houston, however, said that Jersey City went from a 2 to 12 percent vacancy rate over the past decade.

Goldin said that he is not concerned about the current condition of the market for office properties and is confident that the project will be able to find tenants and revenue, once it is completed, stating that his firm is looking far ahead, when he says conditions are set to improve.

"We are dealing with a very targeted market, and we stand by the investment rationale I discussed. … We're not concerned about current conditions, but rather market conditions three to five years out, which will be very different.We want to be ready to capture those relocations rather than react to that potential. In other words, we can differentiate Edison by saying, 'We have buildings ready for you to move into,' rather than 'We can have a building ready in 24 months,' " said Goldin in an e-mail.

Medina concurs with this future vision, saying that commercial properties in New Jersey tend to wax and wane like the moon, and while the state is currently in a low point, to expect an eventual resurgence.

"Even though the economy is slowing and the debt markets are experiencing issues and challenges, I anticipate what we might see is an ebb and flow of that migration [from New York to New Jersey]… and right now it is ebbing but will flow again. All of this is to say the regional geography and economy is functioning well to the extent that companies, because of supply-and-demand issues, cannot find adequate facilities in NewYork [so they go to New Jersey]," said Medina.

Houston, however, says that people have been saying this for years with no real appreciable change and finds this most recent pronouncement no more convincing than others.

"I remember after 9/11, people thought people were going to flee the city.…I was the one person who said it wasn't going to happen. … I've heard the same thing at different times over the last 25 years," said Houston.

Goldin, meanwhile, said that his own research shows that the train station, around which his proposed development is centered, will be what will make things different. His own experts, he said, have shown that offices located near train stations are projected to do better than offices in all other locations because of the desirability of having one's business near mass transit. During the interviewMarch 4, he also stated that there are currently 28 office users in Manhattan looking for facilities larger than 200,000 square feet.

In his e-mail, he also noted that the development would only need to attract a few large users to fill the buildings.

Even if they don't agree on whether office renters would be drawn to Edison, Goldin, Houston and Medina all agreed that developments around a train station would be very attractive to commuters who work in offices.

"The whole transit system is designed to funnel people into New York," said Houston, who also said that in the instance a company was going to move from New York to New Jersey, a nearby train station is a valuable competitive advantage, because it would be much easier to get to clients or to other offices.

On a similar note, Medina, said that having a nearby train station allows companies to be more flexible about where they hire from as well.

"New Jersey articulates with midtown much better than other parts of the city from the perspective of transportation and population," said Medina.

Goldin also said that his proposed development would be more than just a place for offices and said that workers also would be drawn to the various amenities, such as restaurants. He also said that workers might buy condos there as "crash pads" for when they work late and don't want to take the train back into Manhattan at 11 o'clock in the evening. He said that he hopes this is what will make Edison competitive among all of the other towns with train stations that are planning similar developments.

"There will be competition, which is why it is critical for Edison to be the first out of the gate with a world-class project that features a full mix of amenities competing locations cannot offer. This latter point will become a key differentiating factor: Other towns may offer a location for an office building, but we hope Edison is able to offer that, and much more," said Goldin.

The meetings to learn more and give input about the Edison Train Station project will be held March 11 from 6 to 9 p.m., and March 15 from noon to 5 p.m., at the Pines Manor, 2085 Route 27.