In the office market, state economic development incentives are fueling growth in the technology sector and, in at least one case, helping to fill vacancies left behind by pharma companies shedding office space due to acquisitions and mergers.
Currently based at the Brooklyn Army Terminal, Modern Meadow was lured across the Hudson River with a $32 million incentive package from the state. The biotech company secured 72,900 sq. ft. at ON3, the former rebranded Roche campus in Nutley.
Modern Meadow, which designs grows and assembles collagen protein to produce leather materials without live animals, is bringing an estimated 263 jobs to New Jersey.
Roche, which had once employed nearly 10,000 workers, moved its sales and marketing operations to San Francisco after acquiring Genentech in 2009. It completely shut down its Nutley site in 2013. Prism Capital Partners acquired the pharmaceutical giant’s 116-acre former North American headquarters last year, with Seton Hall University and Hackensack Meridian health agreeing to lease two buildings and 16 acres to serve as the campus for their joint medical school. Prism plans to create a live-work-play environment at ON3, adding mixed-use development to the campus to augment its appeal.
The region also saw expansions of technology companies aided by state incentives. Jet.com received a $25.8 million Grow NJ award to create 322 new jobs and expand its existing offices in Hoboken by 39,999 sq. ft. at 221 River. In Jersey City, Nuts.com also received a Grow NJ award in the amount of $3.1 million to lease 24, 372 sq. ft. at 10 Exchange Place and create 150 new jobs.
Bergen County saw heightened activity as Mack-Cali found buyers for six of the nine buildings in its 2.2-million-square-foot office portfolio. A joint venture of Onyx Equities and Garrison Investment Group purchased four buildings in Paramus and Rochelle Park, totaling 848,255 sq. ft. 140 East Ridgewood Avenue was purchased by the current tenant Valley Health System. One of the other Paramus buildings acquired by Onyx and Harrison was 461 From Road, where Glenmark Pharmaceuticals (headquartered in Mahwah) leased 34,415 sq. ft., expanding the facility by 20 percent. This deal, along with Sony’s 49,271 sq. ft. commitment at 115 West Century Road, drove 100,258 sq. ft. of net absorption in the Bergen Central submarket. Mack-Cali also sold 50 Tice Boulevard in Woodcliff Lake to Capstone Realty Group for $27.9 million.
Industrial tenants in expansion mode
E-commerce companies, manufacturers and other warehouse space users are leading industrial spaces throughout the region at a blazing space. The third quarter of 2017 saw more than 5.8 million sq. ft in leasing activity, including 16 transactions over 100,000 sq. ft. Despite robust demand, new construction moved availability moved up 50 basis points to 8.2 percent. Plus more than 14 million sq. ft. are currently under construction, up from 8.6 million sq. ft. at this time last year.
In July, Brooklyn-based Damascus Bakery Inc. leased 200,400 sq. ft. at 65 Industrial Street in Clifton for 15 years. The company was awarded an $18.6 million Grow NJ award to create 150 jobs. Tulfra Real Estate and Hampshire Companies acquired 65 industrial street in 2014 and completed a $10 million upgrade that included raising the roof to 27 feet, changing the exterior and adding new lighting and sprinklers.
Demand for warehouse space in the region is expected to remain strong for the foreseeable future, fueled by the strategic location within the country’s largest consumer market along with the growth of e-commerce and relocations from New York. While availability is inching higher this quarter as a result of new construction, the marketing is unlikely to become overbuilt given the region’s land constraints. Low availability should continue to drive up rental rates over the next year, particularly for modern big-box spaces.