'The Future Is Now': Is Newark's Long-Awaited Revival Finally Happening?
Newark's real estate community is as confident as ever that, in the words of multiple panelists at Bisnow's Future of Newark event at the Prudential Center, "the future is now."
The long-running theme of updating New Jersey's real estate to reflect the demands of today's residential and office tenants is around creating a sense of place. The model has been proven to work at Prism Capital Partners' ON3 development in Clifton and Nutley as well as Ralph Zucker's Bell Works in Holmdel, and multiple panelists believe Newark is poised to be the next success story.
Two major projects have the potential to bring millions of square feet of development, and they have both taken major steps forward this year. The timing is no accident, according to Lotus Equity Group founder and CEO Ben Korman, who cited the dual population shifts of New Yorkers priced out of the city and suburban millennials heading for urban areas as key indicators.
“We wanted to make sure that Newark is ready, because timing is critical," Korman said.
Lotus is replacing the former Minor League Baseball stadium at Riverfront Square with a massive complex of office, residential and retail buildings, with a focus on an active street level to achieve that sense of place, Korman said.
“Newark needs to be a real, 24/7, live-work-play environment," Korman said. "And the question has been ‘How do you do that?’ for four decades. We think housing is the way to do that, and retail will follow and activate the streets. When the streets are activated, safety will become less of an issue.”
After purchasing the site in 2016, Lotus released renderings and a site plan earlier this year, though it has not set a groundbreaking date. The other, arguably more significant, project is already underway in the heart of the city.
The 22-acre Mulberry Commons is a public-private partnership between the city of Newark, the Newark Community Economic Development Corp., the Newark Downtown District, J+L Cos., Edison Properties and the Prudential Center. The public elements include a 3-acre park and a pedestrian bridge connecting Downtown Newark with Newark Penn Station and the Ironbound neighborhood, around which private developers hope to build a host of new properties.
“In cities around the country, a public park is often the origin for spurring major development and redevelopment," Newark Deputy Mayor and Chief of Development Carmelo Garcia said. "So we decided Mulberry Commons would be that destination park.”
The area that will become Mulberry Commons is surrounded by McCarter Highway, Prudential Center and the office plaza Gateway Center. The city contributed $10M to the park, adding to $100M of private investment. The park and bridge are estimated to be completed early next year, followed by the first office component in Edison Properties' Ironside project.
Edison's redevelopment of a former warehouse sits down the street from the Prudential Center at the corner of Edison Place and McCarter Highway. The company has already landed Mars-Wrigley as a key office tenant, and is moving its own headquarters into the seven-story, 456K SF building. Edison Executive Vice President of Development Michael Sommer said it is the first of a series of developments the company has planned for the commons.
“It seemed crazy to leave a vacant warehouse on what would be Mulberry Commons, but also its location of Main and Main with the intersection of McCarter and Edison is unmatched,” Sommer said in explaining the decision to start with Ironside.
Closer to Penn Station, J+L has just delivered the second of several multifamily projects it has planned to fit within Mulberry Commons, called Textile Lofts. The division of labor is emblematic of the collaborative process behind Mulberry Commons, according to J+L principal Gabriel Lopez.
“We’re each working on a different component of the live-work-play [elements]," Lopez said. "Edison has the office component, the Prudential Center is helping with retail, and we’re building the residential density around Penn Station.”
The partnership between the companies and the various public entities dates back over 10 years, to the construction of the Prudential Center, according to Harris Blitzer Sports & Entertainment Senior Vice President of Strategy for Prudential Center Gabe Harris. It started as a way to ensure the growth of the area proceeded in coherent fashion.
But a more recent development has strengthened the business community's belief in cooperation: the Amazon HQ2 pitch. Though Newark ultimately lost out to Long Island City in New York and National Landing in Northern Virginia, its placement on the 20-city shortlist was a significant achievement in and of itself.
“The city identified what was compelling about Newark, and for the first time, we saw a broad PR push by the city,” JLL Executive Managing Director Tim Greiner said.
That concerted effort showed how hard the city's community was willing to work at wooing a major employer, which has boosted its profile among potential tenants. It has also increased the number of interested investors, HFF Senior Managing Director Jose Cruz said.
"From the investor side, there is renewed interest and capital actually being put in place, rather than idle phone calls,” Cruz said. “Goldman Sachs bought a shopping center on Springfield Avenue, and that’s important because it’s not just an urban renewal fund; that’s their capital.”
Cruz was quick to clarify that the city "still has a long ways to go" before it can be considered in the same breath as Jersey City, but Newark's relative value is also an asset as it seeks new office tenants.
“There’s a whole host of new companies today that are attracted to new construction, but when they look at price differential, Ironside looks like mid-$30/SF in rents, while new construction looks to be around $50/SF," Greiner said. He is part of the leasing team for Ironside. "So there’s a large pricing gap.”
As a redevelopment of a historic or aged building, Ironside is far from alone in Newark, which Textile Lofts and L+M Development Partners' redevelopment of the former Hahne's department store exemplify. The value gap between a redevelopment and a new development is significant, and possibly made more so by the creation of qualified opportunity zones in the recent federal tax law.
“Generally speaking, in the real business these days, most investors are short-term-return-driven, not holding longer than five to seven years," Korman said. "And what makes opportunity zones interesting is that it takes pressure off [internal rate of return] and shifts it towards yield, which draws in more patient investors that can save money on those returns. That could be tremendous, and could help solve a lot of issues in post-industrial cities like Newark.”
With Mayor Ras Baraka the recipient of unanimous praise from panelists as a friend to business and development, and many of those panelists actively working with each other on Mulberry Commons and other projects, the Future of Newark event was indicative of what makes the city such an exciting prospect these days.
“The fact that we’re all here is evident that [Newark's revival] is happening now,” Korman said.