The displacement of many businesses has led to an increase in demand for office space in New Jersey.
By: George Frey
In addition to the tragic loss of life resulting from the Sept. 11 attack on World Trade Center, millions of square feet of office space in lower Manhattan were destroyed.
And the displacement of many businesses has led to an increase in demand for office space in New Jersey, area experts agree.
"In a multi-tiered way, there will be effects in the short and long term," said Jerry Fennelly of NAI Fennelly in Hamilton. "There were about 25 buildings that were affected downtown (in New York) which was about 20 to 25 million square feet of total space, so this market will see a percentage of that activity."
Mr. Fennelly reported that area businesses have already reacted to the Sept. 11 events. Some, like Merrill Lynch Inc., have pulled space they intended to rent to other businesses off the market, anticipating moving more of its employees to central New Jersey.
Mr. Fennelly estimated that Merrill Lynch was reserving an additional 65,000 square feet for its own use. (The company would not confirm Mr. Fennelly’s estimate. A published report Sept. 20 indicated that a 127,000-square-foot Merrill Lynch building in Franklin Township had been pulled off the rental market.)
An corporate real estate official at Merrill Lynch, who spoke on condition of anonymity, said the company was in the process of moving 9,000 employees from its New York offices including the World Financial Center, which is adjacent the World Trade Center site, and confirmed the company had pulled some of its space off the market.
"It would be erroneous to say it’s all been pulled," the official said. "We’re still trying to coordinate where all of our people are going to work. A lot of people are going to work from their homes. If people lived in Connecticut and worked in the New York office, they aren’t going to use space in New Jersey. We’re still trying to assess all that."
Mr. Fennelly predicted that as the areas closest to Manhattan fill up, firms will continue to rent space along mass-transit corridors. Space along such corridors is especially desirable for displaced New York commuters because they will be able to use the same train, for example, though now heading for another stop on the line.
Vacancy is low at Metro Park, the large office park on the Trenton-New York rail corridor. New Brunswick, the next major stop to the south, also has limited space available. The Princeton area is the next major stop on the line and, according to Mr. Fennelly, the area has room for more tenants.
Mr. Fennelly said the vacancy rate in the Princeton area is still around the 15-percent level. Prices are holding steady with premium class A space renting for between $27 and $32, class B for $23 to $27 and class C renting for between $15 and $23 a square foot.
"With the demand the price follows," said John Buschman of Insignia ESG Buschman Partners of Lawrence. "They’ve (displaced firms) eaten up all the space in Hoboken, Jersey City and Parsippany something like 700,000 to 800,000 square feet in Parsippany and 800,000 to 900,000 in Hoboken and Jersey City," Mr. Buschman said.
"The prices are not being gouged, but the prices may go up after some time," Mr. Buschman said. "Let’s assume they were getting between $28 and $30 (a square foot) and somebody came along who really needed the space and people knew it. Sure they (landlords) would go for the high end of that range, but I don’t think they raised the bar from what they were getting before."
Mr. Buschman also said the Sept. 11 attack on the World Trade Center had sparked some interest in the market in the Princeton area and that his firm had received a few calls regarding space to rent.
Mr. Fennelly said he thought the Princeton area may eventually see the residential housing market affected, as firms consider possible relocation and employees follow.

