Bergen offices have plenty of space
There has long been a symbiotic relationship between the office markets in North Jersey and Manhattan. As city rents increase, companies consider leasing space in North Jersey, seduced by the lure of lower rents and more available space.
But that isn't happening these days, said Frank Gunsberg, executive vice president of the real estate firm GVA Williams in Parsippany. There are more than a dozen office buildings in Bergen County with more than 100,000 square feet available for lease, he said. According to second-quarter market data released this week by the commercial real-estate advisory firm Grubb & Ellis, Bergen is second in the state to Morris in terms of available office space, with 4.4 million square feet on the market.
"Some of those buildings haven't made a deal in three to four years," Gunsberg said. "So every landlord today in Bergen County is hungry. They have to be. The surprise to every broker in Bergen County is: With what's going on in Manhattan, why aren't these buildings in Bergen County filling up?"
A case in point is the Glenpointe Centre, a 650,000-square-foot office complex in Teaneck where 150,000 square feet of Class A space is available.
Three months ago, the Japanese drug company Eisai Pharmaceuticals Inc. vacated 100,000 square feet in the complex. Buck Consulting fled the third floor a year ago, leaving 50,000 square feet of fully furnished office space available -- what Gunsberg calls a "plug and play opportunity."
GVA Williams had brokered a deal for the third floor after Buck left, only to have the potential new tenant, a major company in the technology/communications field Gunsberg declined to identify, pull out at the last minute when it decided not to consolidate its offices.
Gunsberg characterized marketing space such as Glenpointe Centre as a slow and careful process. The complex has a long list of attractive features, including nearly every amenity available under a single roof: a Marriott Hotel, conference center, spa, restaurants, parking garage that is free to tenants and buses to the Port Authority Bus Terminal in midtown Manhattan. Alfred Sanzari Enterprises, which owns Glenpointe, plans to embark on "a multimillion-dollar capital improvement project" to upgrade the complex.
Perhaps most significant: The asking rents at Glenpointe, which is less than 20 years old, are 25 percent to 50 percent less than current asking rents in Manhattan, Gunsberg said.
GVA Williams' market data shows that while the demand for office space in North Jersey is little unchanged -- vacancy rates in the second quarter decreased only 0.26 percent to 16.59 percent -- vacancy rates in Manhattan are at a historic low of 6.9 percent.
Rents in New York City continue to climb. On Monday, a 26-year-old, 33-story office building at 450 Park Ave. sold for a stunning $1,589 per square foot, or about $510 million. The price is believed to be the most ever paid for a U.S. office building on a per-square-foot basis. That broke the previous record -- set four weeks earlier -- when 660 Madison Ave. sold for $1,476 a square foot.
Average asking rents in New York City have increased more in the past decade than any other city in the U.S., according to a recent study by GVA Williams: 58 percent, to an average of $46.42 per square foot, up from the average of $29.42 in 1997.
Rents for Class A office space in Manhattan jumped 5.9 percent in June to more than $80 a square foot, the largest single-month increase in Class A rents since broker Colliers ABR began keeping records in 1991. Manhattan office rents in all categories rose to $60.71 a square foot, the firm reported, a 33 percent increase over a year ago, according to Bloomberg News.
Gunsberg said many tenants are riding out or extending their leases, rather than jumping ship to New Jersey for cheaper rents. Most of the lease activity that has occurred in Bergen County in the last two years has been renewals, not new contracts, he said.
"But the longer the rents in Manhattan remain overly high, the more we feel that eventually, out of necessity, people will say, 'I made $6 million last year. If I stay in this space, that will be $4 million based on the increase in rent. It's time to move,' " Gunsberg said.
Commercial Real Estate appears Thursdays. E-mail: email@example.com