Jersey City, where New Jersey bet it could transform warehouse and factory tracts into a “Wall Street West” across the Hudson River from Manhattan, was paying off. That is, until its investment bank tenants started collapsing.
Many of the towers that have sprung up in the past decade on Jersey City’s waterfront are filled with satellite offices for the largest investment-banking firms. More than 3,000 employees of Lehman Brothers Holdings Inc. and Merrill Lynch & Co. work in New Jersey’s second-largest city.
Lehman this week filed for the biggest bankruptcy, while Merrill agreed to a takeover by Bank of America Corp. Those firms joined Bear Stearns Cos. and at least 20 banks and credit unions nationally that couldn’t survive this year’s credit crunch.
“It’s basically a disaster for tri-state real estate,” said Andy Merin, vice chairman at Cushman & Wakefield in East Rutherford, New Jersey. “Financial companies drive this region. Clearly of all the markets in New Jersey, Jersey City is the most dependent on New York City and the financial arena.”
Jersey City’s Hudson River waterfront has attracted securities firms since the early 1980s, sparking a building boom for office space that now totals 17 million square feet (5.2 million square meters), more than in downtown Atlanta or Pittsburgh, according to the city’s economic development agency.
GovernorJon Corzine, a first-term Democrat who ran Goldman Sachs Group Inc. from 1994 to 1999, said yesterday he was watching to see if the financial firms cut any New Jersey-based jobs. As much as a third of the state’s economy is dependent on Wall Street, he said.
“I’m worried about the state budget and the state economy in the context of the very dramatic restructuring that we’re seeing on Wall Street,” said Corzine, 61. “We are vulnerable, there is no question about that.”
For Jersey City, the likely impact is layoffs and delayed expansion, said James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University in New Brunswick, New Jersey. Lost revenue from the banks is a larger issue for the entire state, he said. Merrill, for example, has 6,500 employees at its complex in Hopewell and many state residents commute to work at the firm’s Manhattan headquarters.
“We are at risk,” Hughes said. “The lives of individual employees that potentially lose their job and the income losses to the state, particularly the bonus payments, play a big part in the state’s income tax and revenue.”