Jersey City’s Big Office Leases This Year May Mark a Tipping Point

“The last couple of years have been hard for the office market in New York and New Jersey,” Jersey City Mayor Steven Fulop said. “With work-from-home rules, the types of office spaces people are looking for have shifted. So this deal has been a shining light, a really big benefit to Jersey City that we’re excited about.

“Anytime you have a big brand moving thousands of jobs and making a commitment to any municipality, it raises eyebrows and people take notice,” he added. “It reaffirms the fact that Jersey City’s on the move, and that we’re competitive with any city in the region.”

Peter Bronsnick, an executive managing director for Cushman & Wakefield (CWK), which represented building owner BGO in the deal, sees Bank of America’s renewal as a major positive for the market.

“The deal itself was significant beyond the value it created in the asset,” said Bronsnick. “From a market perspective, it set off a cascade of other large deals that are either in progress, close to signing, or signed. From that standpoint, it further validated Jersey City. Anytime you have a major banking institution recommit to a location, it only helps tell the story for other occupiers.”

Rob Norton, a senior vice president of brokerage services for CBRE (CBRE), believes that the renewal expanded what was possible in the minds of many of Jersey City’s owners. (Other brokers at CBRE represented Bank of America in the deal.)

“Getting rid of a large block of space like that was very helpful,” said Norton. “I think it made a lot of other landlords optimistic that they could do the same thing, and it narrowed down the optionality for a big-block tenant that wanted to come to that market.”

The Bank of America renewal was just one cause for optimism in the market this year. Other major office deals in Northern New Jersey — the real estate market that includes Jersey City — have included J.P. Morgan Chase’s 550,000-square-foot renewal and expansion at 545 Washington Boulevard in Jersey City; Samsung taking a 321,207-square-foot headquarters space in Englewood Cliffs; Fidelity Investments signing a renewal for 185,000 square feet at LeFrak’s 14-story 499 Washington Boulevard, also in Jersey City; and Unilever signing for the seventh and eighth floors and most of the penthouse at 700 Sylvan Avenue in Hoboken.

Further confirming the market’s growing strength, a report from Newmark states that the Northern New Jersey office market saw positive net absorption of 612,496 square feet during the third quarter of 2024, the first positive absorption for the market in two years. Leasing activity reached over 3.1 million square feet, an increase of over 33 percent from the prior quarter and a 58 percent increase over the same period last year.

These increases demonstrated not just a thaw in the general leasing atmosphere, with more companies taking space in the region, but also an upward trend in the amount of space being taken per lease, a potential result of the gradual abandonment of hybrid and work-from-home policies. The average deal size last quarter was 4,154 square feet, an increase of 636 square feet over the previous quarter, according to Newmark. Average asking rents were also up slightly compared with 2023.

Mike Pietrowicz, a vice president at JLL in New Jersey, said that Jersey City’s office market benefits from both proximity and comparison to Manhattan.

“Jersey City has always been a value compared to Manhattan,” said Pietrowicz. “The top-tier office products in Jersey City are trading in the mid- to high $50 per square foot gross, compared to that same level of product in New York, which we see at $200-plus per square foot. Jersey City still offers that value, but what companies are really starting to recognize is that the talent pool in Jersey City is one of the tops in the entire country. We’ve seen that development pipeline grow over the past 10 years. You have all these new apartment developments, and companies are starting to see that they could pull very skilled tech labor from Jersey City at a significant value. So Jersey City combines quality real estate value with access to the top labor in this region, which all equates to a very strong market with a promising future.”

Bronsnick notes that, traditionally, Jersey City — at nearly 292,000 residents, New Jersey’s second-
biggest municipality — is a momentum-driven market, and that the impact of the Bank of America renewal is less a direct effect on other deals than a herald of new and much-needed momentum.

“It’s not the direct correlation so much as it brings to light the advantages of occupying Jersey City,” said Bronsnick. “This market has been notorious in terms of its ebbs and flows. When it starts to heat up, it typically takes one big deal for the story to unfold. So the market was stuck. We had considerable vacancy on the waterfront, somewhere in the 25 percent range, and we hadn’t seen any large transactions as we waited out what was happening post-COVID. The Bank of America deal set the market in the right direction, and now you’re starting to see other pieces fall into place.”

Bronsnick recalls Walmart’s $3 billion purchase of online company Jet in 2016, which included a vast expansion of that company’s Hoboken-based headquarters, as a similar momentum-igniting deal for Northern New Jersey’s office market.

“That set off a whole bunch of transactions within Exchange Place and at 70 and 90 Hudson,” said Bronsnick. “It’s more about correlation than it is about one deal.”

Bank of America occupied around 110,000 square feet at Newport Tower under its last lease. As renewal approached, the firm examined its options with an eye toward consolidation.

As it happened, BGO, the result of a 2019 merger between Bentall Kennedy and GreenOak Real Estate, had recently completed a major renovation, including a new $10 million amenity package at Newport Tower. Capital improvements included a 5,400-square-foot, glass-enclosed tenant lounge and conference center that houses breakout and coworking spaces, meeting rooms and a game room. Tenants also have full access to a Club Metro Fitness Center in the building, and there is a selection of on-site food and beverage options in the building’s ground-floor retail, including Chipotle, Just Salad, Gregorys Coffee and a Kura sushi bar.

“Well-done amenity spaces have made it easier to get employees back to the office,” said Rob Naso, managing partner and head of asset management at BGO. “We’ve taken that view across the board on every office building we own.”

The path to Bank of America’s renewal and expansion in the building, which also has the advantage of being just across the street from a PATH station connecting to Manhattan, began with AXA Equitable Life Insurance, which had occupied roughly 245,000 square feet in Newport Tower since 2008 but allowed its lease to expire in September 2023. That space eventually became part of Bank of America’s expanded office.

While it worked out well for BGO in the end, Naso emphasized that securing tenants of that size is never a given.

“A reality of Jersey City is that you don’t see tenants this big come around that often,” said Naso, who notes that BGO was “very aggressive” in its bid to renew the Bank of America lease, including giving the bank access to its in-house design and construction team. “AXA not renewing was part of what made the Bank of America deal happen for us.”

In 2020, BGO had renewed French bank BNP Paribas, which had been a Newport Tower tenant since 2007, for 150,000 square feet for an additional 20 years. Naso sees this deal and the Bank of America renewal as indicators of Jersey City’s growing status among the business community.

“BNP Paribas and then Bank of America renewing is a huge stamp of approval for Jersey City,” said Naso. “This last transaction was a win for us, it was a win for the tenant, and it was a win for the city.”

Bronsnick said deals of this magnitude help justify the area to corporate decision-makers.

“It gives occupiers confidence when they see a leader like Bank of America recommit to a market,” said Bronsnick. “And it validates for human resource departments, procurement, real estate, and the C-suite that they’re making a sound decision based upon the behaviors of others.”

All this activity, then, is catching the attention of other companies seeking a home.

“We’ve seen a meaningful increase in our EDC’s activity speaking to larger corporations that are exploring the office market here,” said Mayor Fulop, referring to Jersey City’s Economic Development Corporation. “We’re in discussions now with some very large developers about new office projects in the Journal Square area.”

The mayor did not elaborate on or disclose the names of the developers.

Even with such interest and with the major leases, assessing the Northern New Jersey office market over the past year or so has not been the easiest task. That’s due largely to one big footprint in flux.

Harborside, a mixed-use complex of 10 existing and proposed buildings on Jersey City’s waterfront, has experienced an ongoing selloff by owner Veris Residential (formerly Mack-Cali) over the past few years. That’s left several large office buildings with relatively new ownership and others with questions about how much space would be available.

“There was a lot of uncertainty coming into 2024 around who the landlords were, who was going to own the buildings, and how much space folks were going to need to utilize,” said CBRE’s Norton.

The buildings known as Harborside 1, 2 and 3 — office buildings from 400,000 square feet to a little over 750,000 square feet — were purchased by 601W Cos LLC in 2022 for $420 million. 601W then purchased the 34-story, 1 million-square-foot Harborside 5 in March of this year for $85 million. 601W will renovate the buildings, including adding an updated amenity package with a fitness center, a conference center, a bar and a rooftop deck.

In July, Waldo International School, a Jersey City private school, announced a new lease at Harborside 3 for 15 years, with another 15-year renewal option, that includes an over $27 million construction buildout.

Given all the current indicators and 2024’s growing list of deals, the current mood for Jersey City’s office market indicates that the days of struggle for local office owners might finally be nudging toward its later stages.

“The more we increase the Jersey City brand and the more that people move here and want to be part of this, it inevitably attracts more and more commercial opportunities,” Fulop said. “Right now, we’re in a very good space.”