Jersey's Gold Coast Competes With Brooklyn, Wants To Become Brooklyn
For the purpose of economic development, the New Jersey Gold Coast’s existence depends on Manhattan, but just a bit farther east lies its biggest competitor.
When companies are priced out of the prime Manhattan office submarkets, it has become commonplace for them to decide between Jersey City, Brooklyn and Long Island City for a home in the New York metropolitan area, Cushman & Wakefield Managing Director David DeMatteis said.
“Once a company decides that it’s not economical to be in Midtown, we are one of the next three stops on the train, so to speak,” DeMatteis said.
It has become even more difficult for individuals than businesses to afford living in Manhattan, and in large swaths of Brooklyn as well. But in areas of the Gold Coast like Jersey City and Hoboken that have been delivering high levels of new construction at rents approaching Brooklyn levels, enticing tenants out of New York is about giving more bang for the luxury buck than offering affordability.
“If someone can only afford a one-bedroom [apartment] in Manhattan or Brooklyn, they can afford a two- or three-bedroom unit in Jersey City,” DMG Investments CEO Jacky He said. “So it’s about getting a larger unit for the same price.”
DeMatteis and He will both be panelists discussing the relationship between New York and its closest New Jersey neighbors at Bisnow’s New Jersey Gold Coast Summit June 12 at Liberty House in Jersey City.
The obvious differentiator between Brooklyn and the Gold Coast is the cultural associations attached to each area. Whereas Brooklyn has been synonymous with trendy and cool for well over a decade, New Jersey has been seen as the opposite by New Yorkers for much longer.
“We’re New Jersey; we’ve been the butt of every SNL joke since I’ve been born, and it’s something to overcome," DeMatteis said. "But Brooklyn was once the same way, and it eventually overcame that.”
The way for Jersey City and its neighbors to establish themselves as destinations is by transforming the retail market, especially the bar and restaurant scene, He said. Though Jersey City has been reaching skyward with new multifamily towers and so far filling them at solid rates, rent growth has lagged behind what some may have predicted five years ago.
Those new high-rises have not been contributing enough retail to fully activate the street level, entrenching the image of Jersey City as a suburban bedroom community despite the glassy skyscrapers, according to He.
"When a project is being planned, [multifamily developers] only think about how many units to squeeze into the zoning, but they don’t consider how much retail that project needs,” He said. “So Jersey City acts kind of like a big dorm for people working in the city — it doesn’t have life, they just live there.”
DeMatteis believes that in the past 18 months or so, Jersey City has "come into its own" as a live-work-play environment, which has played a major role in buoying multifamily absorption numbers. Office tenants make decisions more cautiously and at more of a remove, so they are behind the curve.
"It’s easy for international companies to say they’re in Paris, London and Brooklyn,” DeMatteis said. “We’re losing some of the image-conscious firms.”
Tech and media/entertainment companies have been among the most likely to choose Brooklyn for its cultural cachet, but for decades, the Gold Coast office market was a bastion of finance companies. Since the recession, the portion of office leases that have gone to the financial sector has dropped from about 85% to about 60%, DeMatteis said — a good sign of diversification.
The fashion and garment industry has been hit hard by skyrocketing rents around its traditional base in Manhattan. Established companies like Tory Birch and LVMH have decided to move across the Hudson River rather than the East River, even as upstarts like Rent The Runway are moving to Brooklyn's swanky Dumbo office district.
The presence of those fashion companies, along with some big tech gets like Jet.com, is a reflection that the Gold Coast has built up its office stock to the point where its interior design and amenities, if not its neighborhoods, can compete with Brooklyn for a better class of tenants.
"Everybody is ready with modernized space, because we had sort of a rush of leasing in 2017 followed by a lull in 2018, so landlords have used that time to refresh their product,” DeMatteis said.
Come discuss Jersey City and the Gold Coast with DeMatteis, He and the other panelists at Bisnow's New Jersey Gold Coast Summit at Jersey City's Liberty House on June 12.