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New Jersey Landlords Sweeten Perks With Ride-Hailing Subsidies

peterfoleyforthewallstreetjournal

Peter Foley for The Wall Street Journal

New Jersey office landlords have been sprucing up their properties with everything from food trucks to fitness centers to compete in an era when urban amenities are in vogue.

The latest enticement: Subsidies for digital ride-hailing services such as Uber and Lyft.

Hugo Neu Corp. in March launched a program offering $50 monthly credits for each tenant employee without a car to commute to Kearny Point, an ongoing project to redevelop historic shipyard buildings into office and light-industrial space in Kearny, N.J.

The real-estate investment firm Marcus Partners, meanwhile, is offering new tenants a ride-sharing program that pays the first $3 of a trip to or from its newly acquired office building just outside Morristown’s center in New Jersey.

“Morristown is a wonderful town not only because you have a train station but also because you have restaurants and nightlife,” said David P. Fiore, a principal at Marcus Partners and head of the company’s New York metro region. “We thought the flexibility of a ride-sharing program allows tenants and employees a strong connection to downtown.”

While residential landlords nationwide have been testing similar programs, such incentives from office owners are relatively rare. Services such as Uber and Lyft could help New Jersey office landlords, especially those in areas that are a few minutes’ drive to public transportation and vibrant downtowns, real-estate brokers said.

Subsidizing ride-hailing services also could help landlords attract tenants looking to pack more people into less office space, particularly in areas where parking is tight, brokers said.

“The trend is companies putting more people in less space for efficiency and cost effectiveness,” said David Simson, a vice chairman at real-estate services firm Newmark Grubb Knight Frank. “When you are in the suburbs, you run against the wall that is parking.”

Older office buildings were built with three to four parking spaces per 1,000 square feet of office space, but modern office spaces require upward of five spots per 1,000 square feet, according to a Newmark report. Adding parking decks can cost between $20,000 and $35,000 per space, the report said.

Parking constraints for train commuters prompted Summit city officials last fall to launch a pilot program subsidizing city residents’ rides to and from the train station. The participants pay $4 a day round trip and the city subsidizes the rest.

So far the program, a possible alternative to expensive new parking, has freed up 30 to 35 parking spaces a day, said Michael Rogers, Summit’s city administrator. The city has increased the number of participants in its program from 100 to 150 people.

Adequate parking, however, hasn’t been the issue for the property at Kearny Point’s Building 78, which houses many small businesses from tech firms to artisanal food makers, and offers a co-working space. Hugo Neu, which owns and develops real estate, added the Uber credits to provide another transportation option and has found that its co-working tenants, many of whom don’t have cars, have been using about half of the credits, said Nick Shears, director of leasing at Hugo Neu.

The Uber subsidy is what allowed Alak Vasa, founder of chocolate maker Elements Truffles, to add three people to her team at Kearny Point and keep a critical employee who had been with the company in its first space in Jersey City.

“We have people who live in Jersey City who we have already invested in,” Ms. Vasa said. “How do we get them here?”

Marcus Partners is hoping the incentive will provide a seamless connection to downtown Morristown, which is nearly 2 miles away.

The ride-share program, which isn’t yet in use, is one more amenity the company hopes will draw tenants to the 121,000 square feet of space available at the Morristown building, which its brokers said offers less expensive rents than those downtown. Marcus also is investing about $7.6 million in improvements that include a new glass facade, better lighting and terraces.

“The divide we have to get across is being in a downtown location,” said Bill Brown, executive director at real-estate services firm Cushman & Wakefield and part of the team marketing the building. “And the way we’re trying to bridge the gap is with a ride-sharing service.”

The post New Jersey Landlords Sweeten Perks With Ride-Hailing Subsidies appeared first on Real Estate News & Insights | realtor.com®.