FEATURE ARTICLE, JANUARY 2009

MEADOWLANDS POISED FOR GROWTH
Meadowlands office market poised to benefit from competitive pricing and extensive local development.
Margaret Egan

In today’s challenging economic climate, companies across all industries are looking to reduce overhead costs to remain competitive. For many firms, the best way to achieve this has been to relocate a portion of their businesses to less expensive office markets located outside of Manhattan, including those in neighboring Northern New Jersey.

Termed “Wall Street West,” the Hudson Waterfront submarket in Northern New Jersey, which includes cities such as Hoboken and Jersey City, was targeted first because of its close proximity to Manhattan and low asking rents, which range from the high $30s and low $40s per square foot.  Eventually, this submarket became supply constrained, causing some businesses to seek alternative locations, such as the Meadowlands, which offers greater availability and options at even lower costs than the Waterfront.

A Low-Cost Alternative Without the Extra Commute

Located just 6 miles outside of Manhattan, the Meadowlands boasts an inventory of 9.5 million square feet of office space in 69 buildings, with tenants including Aegis, Panasonic and Ernst & Young. Meadowlands tenants enjoy very competitive rental rates (in the high $20s to low $30s per square foot) for Class A product, and considerable infrastructure and service improvements, which are becoming available as several significant projects near completion. These upgrades will allow commuters easier access to New York City and more varied retail, dining and entertainment options. 

Ultimately, the Meadowland’s close proximity to Manhattan not only affords businesses that are relocating to New Jersey the opportunity to save money in rental costs, but also allows for access to top-tier labor and New York City clients. And, with the continued investment in infrastructure and development projects in progress, the area’s reputation as a viable, reliable and cost-effective alternative to operating a business on the Hudson Waterfront or in Manhattan will be further enhanced.

The Revitalization of the Meadowlands

While close in proximity to Manhattan, the Meadowlands submarket has been criticized for lacking the infrastructure that tenants often require, such as convenient and reliable access to public transportation, suitable dining, shopping and lodging options, and a sense of a downtown presence. Recognizing that addressing these issues was essential to building and sustaining a vibrant office market, the Meadowlands has undergone significant changes over the past 5 years that have helped to improve infrastructure and pave the way for future developments. In fact, the submarket is currently leading the state with approximately $2 billion in development activity and infrastructure upgrades.

First, in 2003, the New Jersey Transit Authority opened the Secaucus Junction transfer station, a $450 million project which services more than 2,700 riders a day and connects nearly all of New Jersey’s 11 rail lines, allowing commuters to transfer to nearly every part of the New York Metropolitan area by rail — including Midtown Manhattan, Newark Airport, and the Meadowlands. Secaucus Junction is also accessible by Amtrak, which offers commuters and travelers from nearby states, such as New York, Connecticut and Massachusetts, easy access to the Meadowlands.

Next, in 2005, the New York Giants and New York Jets football teams announced plans for a new stadium and training complex, which will be located adjacent to the existing Giants Stadium at the intersection of Route 3 and Interstate 95. The stadium, which is scheduled to open in the fall of 2010, will include more than 200 luxury suites, 9,200 club seats, two club lounges and four restaurants.

And, finally, in 2006, plans for the Meadowlands Xanadu project were announced, which included as the first phase of development a 2 million-square-foot retail and entertainment complex, the largest of its kind in the United States and the third largest in the world. This project has attracted not only high-end retail and entertainment tenants, but will also bring an array of dining options to the area, including The Cheesecake Factory, The Melting Pot and a gourmet food market called Zeytinia, which features on-premise dining. In addition to the retail and entertainment facility, plans also call for the development of four 440,000-square-foot Class A office buildings, and a 520-room, 12-story hotel, which will be adjacent to the mall. 

Both the new Giants/Jets complex and the Xanadu project have infused public and private funds into infrastructure upgrades for the region, such as the development of a $182 million mass-transit rail project in the area, which will link the Pascack line to the new Giants/Jets complex and the surrounding Meadowlands region, providing the region with rail service to Hoboken Terminal and to New York Pennsylvania Station via Secaucus Junction. In addition, Route 3 will be widened to accommodate the increase in daily traffic flow, which will help alleviate existing congestion, and plans are in place to extend the Hudson-Bergen Light Rail to service the Xanadu complex and the surrounding area.

The Future of Operating a Business in the Meadowlands

Improved road infrastructure, public transportation and additional service amenities are only a few of the enhancements that will help the Meadowlands become the preferred office market of Northern New Jersey.  

For New York-based companies considering a relocation to Northern New Jersey, the state offers incentive packages to help encourage the leap across the river.  Job creation grants offer companies a $500 to $1,500 credit for each employee they bring to New Jersey for 20 years, and business employment incentive programs offer direct payment grants to businesses that are expanding or relocating to create at least 75 new jobs in a suburban municipality or 25 new jobs in an urban area.

Competitive, Class A leasing opportunities exist throughout the Meadowlands at properties such as Metropolitan Center, a 15-story, 423,000-square-foot trophy office building owned by ING Clarion, a division of ING Real Estate. Currently available at Metropolitan Center is 124,000 square feet of office space as well as its high-profile exterior signage. Recognized as one of the most visible office buildings in Northern New Jersey with frontage on Route 3 and Interstate 95, Metropolitan Center overlooks Xanadu and the new Giants/Jets complex.

The property underwent a multi-million dollar capital improvement program that includes a new lobby, state-of-the-art security system, fitness center and numerous infrastructure improvements. The property offers tenants a shuttle-bus during commuting hours for convenient access to the nearby Secaucus Junction railway station, and this service will be enhanced in the future to provide access to the improvements associates with the new stadium and Xanadu.

Moreover, adjacent to the property is the 427-room Sheraton Meadowlands Hotel & Conference Center, which recently underwent an $18 million renovation and is now recognized as one of the finest business hotels in the market. The hotel and its 30,000-sqaure-foot conference center offer tenants of Metropolitan Center the luxury of having on-site overnight hospitality and a variety of meeting room accommodations.

With changes to the region’s mass transit, roadways and community services in progress, and competitive leasing opportunities available at premier office buildings such as Metropolitan Center, the future has never looked better for the Meadowlands. And despite challenges in the current economy, owners of real estate in the area, are optimistic on the short- and long-term prospects that this region has to offer. 

Margaret Egan is a vice president of Manhattan-based ING Clarion.

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