Mega Transactions Create Shift in Northern NJ Office Market
16 Jun, 2005, Parsippany, NJ
Two major user transactions and an investment sale involving suburban office campuses have created a fundamental shift in the northern New Jersey office market - specifically in Somerset and Morris counties - during the past 12 months. Like other markets across the nation, New Jersey was hard hit by the last economic recession. Large blocks of space came onto the market, and leasing activity slowed considerably. Vacancy rates crept up, and sublease availabilities proliferated in the market. This scenario tested the viability of selling and leasing large spaces to users at a time when corporate America was focused on operational efficiencies and cost savings.
Verizon's commitment to purchase a 1.3 million-square-foot campus in Basking Ridge, Citigroup's 817,000-square-foot lease commitment last year in Warren Township, and The Gale Company's recent $125 million investment acquisition of a 670,000-square-foot property in Bridgewater are very significant.
The two mega-transactions by users involved Verizon and Citigroup moving to New Jersey from out-of-state. This suggests that New Jersey's distinct real estate advantages, combined with a pro-business government, are cementing the region's reputation as a preferred location for large corporate headquarters. The Gale purchase reflects continued strong investor confidence in the future of the market.
THE SUBURBAN CAMPUS COMEBACK
The property includes five interconnected buildings, two parking garages, advance technology and security systems, an 800-seat cafeteria and development rights for up to 800,000 square feet of additional space. At the same time, it sits in a pristine natural setting, with abundant wooded areas and walking trails. Open-air atriums and extensively windowed common areas bring nature inside.
While internal operational changes prompted BASF to relocate its headquarters last year, the firm has remained committed to New Jersey and the Morris County region and all the benefits that are offered to sizeable corporations in the Garden State. The company's dedication to providing a quality, working environment for its employees reflects why FORTUNE magazine recognized the organization earlier this year as America's Most Admired Chemical Company.
Today, BASF's Mount Olive facility provides, arguably, the most intriguing opportunity for users looking to operate in a suburban campus location in the New York metropolitan area. And, within New Jersey, Morris County represents one of the most desirable settings. The region's growth and financial stability has enabled it to maintain a triple-A bond rating for 27 consecutive years by Moody's Investor Services. The bucolic appeal of western Morris County truly justifies New Jersey's distinction as the Garden State.
Many large users - like Verizon and Citigroup - traditionally have maintained Manhattan headquarters locations. Consolidating into one large complex in the suburbs enables them to lower overall real estate occupancy costs through savings on security, technology and staffing.
WHY NEW JERSEY? New Jersey has been on the "short list" for corporate headquarters locations since the suburban migration in the 1970s showcased the state's attractive quality of life, outstanding labor pool, strong transportation infrastructure and lower rental rates than Manhattan. Today, 22 Fortune 500 companies have headquarters in New Jersey, and the state enjoys a diversified business base in industries such as pharmaceuticals, biotechnology, telecommunications and electronics.
New Jersey's generous incentive programs have been a notable draw for companies looking to locate in the state. Not only are the incentives valuable for companies coming from out-of-state, but they also can help companies that are moving jobs within the state, if those companies were considering shifting jobs elsewhere.
All of these factors - quality of life, outstanding labor and infrastructure, and operational efficiency - have contributed to the recent surge in mega transactions, and demand should increase further with economic improvement. As such, with the former BASF headquarters being the only large campus on the market in northern New Jersey, it will be interesting to see whether the company that takes advantage of that one-of-a-kind opportunity comes from within New Jersey or from out of state.
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