The “frenzy” sparked by Amazon’s search for a second headquarters site shows just how tough the competition for jobs has become, and New Jersey towns must adapt to that cutthroat real estate environment, according to a local developer at a conference Thursday.
Several panelists echoed the sentiments of Eugene Diaz, founder and principal partner of Prism Capital Partners LLC, who said that municipalities have to be open to change, and redevelopment, that appeals to today’s workforce in order to drive economic growth in the Garden State.
And that adaptability will also help the private sector to reposition antiquated “white elephant” properties, such as large vacant suburban corporate headquarters, according to speakers at the Revitalizing and Repositioning New Jersey confab.
“The leading piece of that is really creative developers, cooperative towns and the kind of reception to the marketplace that looks forward, not back,” said Tim Lizura, president and chief operating officer of the New Jersey Economic Development Authority.
About 160 people attended the conference, hosted by Bisnow at ON3, the mixed-use complex that’s being created on pharma giant Hoffmann-La Roche’s former campus on Kingsland Street, straddling Nutley and Clifton, NJ. Prism is the developer on that project, and Diaz talked about the demand for work-live-play complexes, especially from millennials, that create an urban environment in suburban areas.
“Capturing labor force is the single most critical factor in location decisions today by corporations,” Diaz said. “Globalism has made the competition for jobs just fierce. We compete internationally, against other countries. We compete state to state. We compete city against city. And having a robust opportunity of a package of both location and quality of environment and cost structure is really a critical component. The campus here has been able to weave all of that together.”
During the morning panel called Reinventing New Jersey’s CRE Assets, not only Diaz and Lizura but Jose Cruz, senior managing director and co-head of HFF’s New Jersey office in Florham Park, discussed the booming market for apartments in the state and the reluctance of some municipalities to accept that commercial use. New Jersey has more than 500 towns, and they have to grant approval for development within their jurisdictions.
“Home rule is quite frankly just a terrible way to conduct development business, and if I had to do this all over again I’d move to Houston and start there,” Diaz said. “I’d never have to appear before another (local) planning board ever.”
There is an undersupply of new rentals units with the latest amenities in New Jersey, according to Diaz. As such, they are a valuable commercial real estate category that capital is “chasing,” drawing all kinds of investors in New Jersey, said Cruz, who recently brokered the $146 million sale of a 240-unit Hoboken, NJ, apartment building. He also said that he has been a renter for 17 years.
But in some Jersey towns, there is “fear-driven” opposition to multifamily development, according to Diaz, based on old stereotypes about apartment dwellers.
“The idea is that the people who live in apartments are somehow poorer or less successful or not the kind of person you want in your community,” he said.
That’s not the case, according to Diaz, who said the average age of his renters is 49, and that they are often affluent empty-nesters who have downsized from larger houses. For what they were paying in local property taxes in New Jersey, they can lease a luxury apartment with modern amenities, he said.
“We are doubling and tripling the median household income in the townships we are developing rental housing in for those people that are coming in,” he said. “It’s a huge lift.”
Lizura agreed that municipalities have to accept the reality of the current economic environment in the Garden State.
“The rental market is just booming,” he said. “You can’t really grow your economy unless you grow your population base: It’s impossible. The towns have to understand that the market is what the market is, and if they want their town to grow and they want their town to be able to prosper, you’ve got to be able to work with them.”
Developers must educate a municipality’s officials, planners and constituents about the evolving real estate landscape, according to Diaz.
During a question-and-answer session, Lizura was asked about Gov. Phil Murphy’s call for a revamping of existing legislation governing the granting of tax incentives to businesses. The current law, which sunsets next June, was passed during the Great Recession, Lizura said.
“But maybe the market’s changed a little bit” since then, he said.
In response, Diaz described what he called the “frenzy” of cities trying to land Amazon’s HQ2, and said companies like his are facing similar competition, on a smaller scale, to draw tenants. In the case of a bio-fabrication firm, Modern Meadow Inc., Prism successfully competed against New York City and brought the firm to ON3, after it received a promise of $32.2 million in New Jersey tax incentives, from Brooklyn, NY.
“If New Jersey loses the ability to compete and offer some type of competitive package given the cost structure that’s here in New Jersey, we will not get any new jobs in this state,” Diaz said. “And that message needs to be delivered to Trenton every day.”
Modern Meadow, a manufacturing and research company, started with 15 employees onsite at ON3 and now has 95 workers, and is adding more, according to Diaz.