After years of little activity, Newark has become a much discussed market recently. Long known as a “musical chairs” market, Newark is not only seeing new tenants, but potentially new investors as well.
While everyone knows about Newark’s access to New York City and other areas of New Jersey via public transportation, many don’t know that it is also one of the fiber hubs of the east coast. Because of its rich telecom history, including Bell Labs, Newark has a fiber infrastructure that is superior to other submarkets in the region. One of the largest telcom hotels in the country, 165 Halsey Street, is served by 56 telecom providers, connected directly to the fiber spine that runs along the train line.
Last year, when Panasonic moved in to their new building, built by SJP Properties and Matrix Development, it marked the first new Class A office building built in the market in over 10 years. Prior to Panasonic, the last building was built for the FBI, and they simply moved from One Gateway Center, leaving a gaping hole in that building when they vacated. Panasonic, however, moved from the Meadowlands, seeking an urban location with amenities within walking distance and easy access to New York City via train. Their new building provided them with a dense work environment and the public transportation infrastructure meant that they didn’t need to accommodate for an above-market parking need.
In 2012, Prudential unveiled their plans for a new office tower on Broad Street to house 2,000 employees. This caused a ripple effect in the market from which we are now just beginning to see the impact. Because Prudential is one of the largest tenants in Newark, this meant that they would likely be vacating large blocks of leased space, primarily in Gateway Center which now has over 1m square feet available in the four building complex.
Just this past quarter, Three Gateway began marketing over 500,000 square feet with a published asking rental rate of $29.50 per square foot, this changed the market numbers significantly. Not only did it spur a decrease in the average Class A asking rental rates in Newark from $34.36 to $31.95, a drop of $2.41, but it was also the catalyst for the overall asking rental rate in Newark to increase from $23.92 to $26.56, an increase of $2.64. It’s pretty interesting when you dive in to the granular aspects of the numbers.
So what does the future hold for New Jersey’s largest city? Gateway Center landlords are relying on Governor Christie’s Grow NJ incentives to help re-tenant their buildings. Will we see more companies moving in to take advantage of the infrastructure like Panasonic? Only time will tell.
What are your thoughts?