Kevin Collins calls the Grow New Jersey program a no-brainer.
“It’s kind of like Economics 101,” said Collins, C&K Properties’ managing director of asset services and developer of Newark’s 2 Gateway Center.
“Companies get a substantial tax credit, but I think what has been the larger benefit has been the concept of giving companies incentives,” he said. “You’re paying a company to relocate somewhere.”
The program, spearheaded by the state’s Economic Development Authority, has helped fill vacant properties throughout the state, with companies agreeing to move to certain areas in return for tax credits. Building owners use the incentives to market space to companies that can take advantage of the tax credits.
“When companies are told they’ll be given bonuses to move to that location, the location moves from the No. 3 spot to the No. 1 choice,” said Ted Zangari, chair of the real estate department and public policy practice group at Newark-based law firm Sills Cummis and a legal advisor for companies seeking to take advantage of the program.
“Large empty office buildings in suburbia are filling up because of Grow NJ,” Zangari said, citing a company that moved to Neptune Township over Woodbridge’s MetroPark in order to take advantage of the tax credits.
Qualified Incentive Areas include locations near public transportation or where the median income falls below a certain level.
Companies that apply for the program and fulfill a host of specific criterion – including company size and number of employees – may qualify for the credits, which range from $500 to $5,000 per job each year. Bonus credits can range from $250 to $3,000 per job.
Dudley Ryan, CBRE senior vice president of advisory and transaction services, said the program is a must for commercial real estate.
“In a word, the program is critical,” Ryan said. “It has changed the business of commercial real estate, and real estate and Grow NJ are intertwined and probably forever more. Often you get people asking why we’re getting these huge incentives when they don’t understand that there’s more to gain by having the jobs than the Grow NJ tax credits.”
Since being signed into law in 2012, the program has awarded more than $8 billion in tax credits to companies who locate projects in urban transit hubs or distressed areas.
Collins said 2 Gateway has welcomed several companies in recent years who have taken advantage of the incentives.
“Newark for a long time was not on any corporate planner’s list of specific destination locations for several sundry reasons,” Collins said. “The program has certainly had an impact on how a company makes decisions.”
Broadridge Financial Solutions moved its large employee workforce from Jersey City to Newark’s 2 Gateway at the end of last year because of the tax incentives.
“Grow NJ was a major incentive for Broadridge Financial not only to expand here in New Jersey but to bring nearly 1,000 employees to Newark,” said J. Michael Hopkins, Broadridge’s managing director for global technology and operations. “We are proud to be one of the leading companies in Newark’s blossoming technology scene, increasing employment opportunities and facilitating economic redevelopment for the entire area.”
The EDA said the program has allowed New Jersey to stay competitive.
“We have found that the availability of the Grow NJ program to eligible tenants is a boon to landlords, as it can help to level the playing field when competing with an out-of-state location,” an EDA spokesperson said.
Zangari said the program grew out of the 2008 recession and has been effective in retaining companies and attracting new ones.
“Typical competition for New Jersey are the crescents of states around us,” Zangari said. “The Grow NJ program has been generous enough to narrow the gap even with states in the Sun Belt. Generally companies are evaluating multiple states and that’s when the program becomes vital because all states around New Jersey with the exception of New York are cheaper than New Jersey.”
But with the program set to expire in July 2019, Zangari said the state needs to assess and extend the program sooner rather than later.
“I and other real estate professionals hope the program will be extended before that,” Zangari said. “It would be highly unwise for the legislature and the governor to wait until July to make a decision as to the fate of Grow NJ. I’m already hearing from other brokers that companies are looking at other states because they don’t know the fate of the program.”
He added that brokers look for space far ahead of lease expiration.
“Most companies that are looking for space in 2019 have already begun the process,” Zangari said. “The program is starting to lose its vigor and by the fall it could be perceived by the real estate community as dead. We need to mend and extend the program.”