Office demand in the Garden State may have ebbed this summer, but three developers are wagering $150 million that it will bounce back.
The joint venture of Philadelphia-based developer Shift Capital, Newark’s Hanini Group and CoInvestment Partners — a firm active in New York City — picked up two historic office towers in Downtown Newark plus a 900-space parking garage for $80 million this week.
The Class B buildings at 707 Broad Street, sold by Hartz Mountain Industries, and 153 Halsey Street, previously under the care of a county improvement authority, span a total 816,000 square feet.
They last changed hands over 25 years ago for about $24.2 million.
The tri-state partnership plans to sink another $70 million into refurbishing the towers and to lease the buildings’ street-level storefronts to help brand Newark as a destination for commerce. The firms said they would also add wellness amenities to attract new firms seeking office space.
CoInvestment’s principal investor Piyush Bhardwaj painted the purchase as an investment in “Newark’s rebirth” as the city emerges from the pandemic.
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New Jersey’s office market hits wall in third quarter
That would make it the city’s fourth attempt at a renaissance in recent years. In 2019, The Real Deal reported on the third — Newark’s play to lure retail and office development to the city’s Ironbound section — which came after “the New Newark” and “the New New Newark.”
The office market in New Jersey has not recovered from the pandemic. Vacancy rates hit a 15-year high in the second quarter, Avison Young reported. And leasing volume between July and September was half that of the previous period.
The downshift in demand isn’t a surprise considering the state lost 4.1 percent of its office jobs during the pandemic, more than during the Great Recession.
And residents aren’t flocking to Newark; they’re leaving.
Between March 2020 and January 2021, Newark residential rents surged over 30 percent as New Yorkers fled to satellite cities. Then, prices did an about-face, a report by Zumper found.
“The rent in Newark fell so rapidly after the vaccine rollout that today it’s now down 6 percent compared to March 2020.” report author and Zumper data scientist Jeff Andrews wrote in August.
As New York pulled back its renters, demand in adjacent cities plummeted. Newark lost momentum and has yet to regain it.