Business News

NRBP Panel: Economy "Bouncing Along at the Bottom" By Eric C. Peterson, Senior Correspondent

NEWARK – Economic deterioration has generally stopped, but employers are reluctant to hire and that's likely to mean a slow rebound for New Jersey's – and the nation's –
markets. That was the general message offered up by speakers at the Newark Regional Business Partnership's annual real estate market forecast event yesterday.

And while household spending has picked up, "a lot of it is from people borrowing against the value of their homes," cautioned Rae D. Rosen, senior economist for the Federal Reserve Bank of New York. "At the same time, employers remain reluctant to add to their payrolls. We're bouncing along at the bottom and people aren't yet comfortable enough to start hiring. We haven't turned the corner."

The New York/New Jersey region, meanwhile, "is experiencing both cyclical and structural change," Rosen said, pointing to the number and size of firms, sources of new financial business, budget gaps, and regulatory changes relating to productivity and compensation. On balance, "don't expect unemployment to come down quickly," she concluded. "This will be a slow recovery."

For real estate in particular, the current supply side (vacancies) relates directly to the demand side (jobs), noted Philip Lipper, SVP and co-branch manager for Studley. For New Jersey, office availability hasn't been affected as dramatically as New York and other national markets. "The market was not overbuilt," he noted, adding that average asking rents statewide are just a few cents off now from before the recession.

Similarly for the industrial market, "we haven't had tremendous growth, so there wasn't a huge drop-off," Lipper said. "The market has been steady compared to others."

For economic development, "Gov. Chris Christie and Lt. Gov. Kim Guadagno have been actively talking to companies that might be thinking of leaving," said Caren Franzini, CEO of the New Jersey EDA. Referring to that and other Christie initiatives relating to business, "things have changed," she said.

For specific projects in the region, RBH Group has begun focusing on schools to key economic development. After studying various other redevelopment plans, "we found no inclusion of education and schools," related Ron Beit, RBH founder/CEO. Specifically, his company is working on "teacher villages," including an eight-building complex with residences for Newark teachers and charter school space between the city's University Heights district and Prudential Center.

And Boraie Development is working on 1 Rector Street next to the NJPAC in Newark, including 152 units of market-rate housing. NBA star Shaquille O'Neal, a Newark native, is a partner in the project, which helps with branding. "We're sending a message that Newark is ready for market-rate housing," said Wasseem Boraie, the company's VP. "We're starting to create a critical mass here," he said. "Pent up demand is strong."

Another key project is Dranoff Properties' 44-story tower with 300 apartments plus restaurants and shops adjacent to the NJPAC. "We are strong believers in arts and culture," said Julia Gutstadt, Dranoff's development manager. "NJPAC has created a destination and we are pleased to partner with them. We are leveraging arts and culture to bring people in the city to live."

All of these projects have passed the financial models to be a financial success, panelists agreed. "We look at a project from a market perspective, including the economic development benefits test," said Michael Shenot, managing director for Jones Lang LaSalle. "The question is, what will a project do for the local and state economy? Will it be sustainable?"

The importance of the port was stressed by the panel. "What goes on at the port is important to all of us," stressed David Gockel, president/CEO of Langan Engineering & Environmental Services. While noting that the harbor deepening project is about done, allowing larger vessels to enter, "the land side is not in good shape," he said. "There is not enough space," he added, but pointed to programs to take advantage of rail and the state's Portfields Initiative's successes in redevelopment of archaic warehouses as "helpful."

Still to be answered is the problem involving "the front door to Port Newark," namely the Bayonne Bridge. Air draft isn't sufficient to admit larger ships expected to come calling after expansion of the Panama Canal is completed, which could direct ships to other ports on the East Coast. If the problem isn't corrected in time, "the port and the state will be in trouble," he said. "It's the greatest challenge the state faces today."

Ted Zangari, redevelopment law chair for Sills Cummis & Gross applauded such state efforts as the Urban Transit Hub Credit and Economic Redevelopment Growth Grant and Licensed Site Remediation Professionals program for what they've accomplished so far. "There are no incentives 'out there' that are as good as the hub credit and ERGG," he said. "But more changes will come. We need to re-prioritize how the state and communities work together. We need speed."

Finally, he echoed thoughts about Gov. Christie's and Lt. Gov. Guadagno's pro-active approach to talking to businesses and "ending the state's no-poach policy relating to business," Zangari concluded. "They are off to a wonderful start in economic development."