NJ Landlords Use Economic Opportunity Act Incentives to Court New Tenants
January 14, 2014
In the wake of the passage of 2013’s Economic Opportunity Act, many landlords with New Jersey properties are working to utilize the advantages created by the new law to incentivize tenants to sign new leases. According to one Newark landlord, some tenants may even be able to parlay those incentives into 10 years of rent-free rental, according to a njbiz.com report.
For Newark landlord C&K Properties, the 2010s have been a trying decade. When one of its major tenants, Prudential Insurance, decided to move into a new facility, the insurer vacated its old space, which occupied more than a third of C&K’s 832,000-square-foot 2 Gateway Center, according to the Wall Street Journal. C&K tried to block Prudential’s new building in court, but failed.
Now, though, the landlord has a new weapon in its effort to fill its vacant space: the Economic Opportunity Act. According to Kevin Collins, C&K’s managing director for asset management and finance, the new law has created a dramatic influx of incentives. In a best-case scenario, Collins believes these incentives could be big enough to cover all of a tenant’s rent expenses. “[T]here is a significant pool of money there that could completely cover a tenant’s occupancy,” the director told njbiz.com.
The new law revamped an existing program, Grow New Jersey, offering tax credits in certain situations. For example, under the revised Grow New Jersey program, if a project involves renovations, a tax credit is available if the landlord and tenant spend a combined $40 per square foot.
The program also offers “bonus points” for renting properties located within one of the state’s “urban transit hubs” and also being situated near a means of mass transit. This helps C&K, whose Gateway Center property in Newark meets both of those criteria. In order to help potential tenants navigate the system of tax credits and other incentives, C&K offers them an “incentives concierge” service that helps them understand their options and identify incentives for which they might qualify.
Nevertheless, some experts have expressed pessimism. “It’s going to be a challenge for the landlords,” Jonathan Meisel, a managing director with Jones Lang LaSalle Inc., told the Wall Street Journal. Landlords across Newark are struggling with rising vacancy rates. The rate for top-quality office space in Newark was at 16.9% and 27% for secondary space, having risen steadily since 2010, the Journal reported, citing research from Cushman & Wakefield Inc.
The challenges of rising vacancy rates, along with the benefits of the revised Grow New Jersey program highlight both the hurdles facing New Jersey landlords, but also the opportunities that exist for landlords creative enough to work with tenants and maximize the benefits offered by the revised incentive programs. For detailed and knowledgeable advice about the new law’s parameters, and ways to use them to benefit you in your commercial lease, consult the real estate attorneys at Samuel C. Berger, P.C. Our New Jersey real estate attorneys are highly skilled and vigilantly remain up-to-date on the state’s relevant laws and regulations regarding commercial landlords and tenants to ensure you get the maximum benefit available to you. Reach us online or call (201) 587-1500 or (212) 380-8117.
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