Businesses relocating to New Jersey such as Teva Pharmaceuticals have been grabbing the headlines, and there’s a consensus among economic development insiders that the motivations for such moves run well beyond tax credits.
For instance, it’s no coincidence Teva – in addition to reaping $40 million in state-funded tax incentives – will land in a business park in suburban Parsippany when it arrives from Pennsylvania.
“Because of the transit-rich assets of airport, seaport, rail, our suburban locations are still viable,” said Lyneir Richardson, who heads the Center for Urban Entrepreneurship and Economic Development at Rutgers Business School in Newark.
To further boost that appeal, developers have been giving older suburban office spaces entire makeovers, doing away with the leftovers from the bygone era of sprawling, suburban office headquarters.
“The developers are pretty savvy,” said James Hughes, a Rutgers professor and Dean Emeritus at the Rutgers Edward J. Bloustein School of Planning and Public Policy. “They understand the market, and they are adding these new sets of activities so it’s not a one-dimensional office environment.”
Somerset Corporate Center in Bridgewater, off Route 202 near Bridgewater Commons, is one such example.
“It was a one-dimensional campus,” Hughes said. “Now they’re adding a hotel, a health club. They’re adding these amenities that make it much more than a simple office space.”
Of course, companies are leaving the state, too.
In 2015, Mercedes-Benz USA bolted Montvale for Atlanta and the South’s lower-cost labor pools. Other occasional departures – plus data showing a tendency for college grads to settle outside the Garden State – have prompted various offers of tax-based incentives to skittish companies around the state and those who might be tempted to move here.
The city of Newark and state Economic Development Authority are offering a combined tax incentive program of $6 billion in a bid to attract Amazon’s proposed second North America headquarters. And the New Jersey Motion Picture & Film Commission is going to dole out $425 million in film tax credits between 2019 and 2023 in an effort to attract TV, film and digital media producers.
Elsewhere among the comings and goings, investment banking and financial services firm Barclays recently opened a suburban Whippany campus; LugTrack, maker of GPS luggage-tracking technology, announced plans to expand its operations in Red Bank; as did financial services firm ETrade in Jersey City.
“The primary considerations are, ‘Can we profitably do business to service our customers from this location?’ and [the fact that] New Jersey is clearly a profitable place,” Richardson said.
Tom Bracken, president of the New Jersey Chamber of Commerce, said the state’s key selling points include “workforce availability, quality of life, access to markets, many things.”
New Jersey also represents a more affordable location than nearby New York, Hughes said.
And Richardson said its location is also favorable for distribution considerations. The state’s suburban office parks tend to be located along major thoroughfares, he noted.
Barclays and Teva are both close to Interstates 287 and 80. And many pharmaceutical companies are clustered around Princeton in the Route 1 corridor, Hughes noted.
In urban areas, elaborate rapid-transit infrastructure helps draw employers, businesses and the younger, educated workforce, Richardson said.
Michele Alonso, director of planning for Asbury Park, said there has been a general influx of businesses looking to move back-end operations such as finance, human resources, information technology and payroll into suburban offices in North Jersey and elsewhere.
“You have some businesses that want to have a Manhattan address, so they’ll keep their headquarters small in Manhattan,” she said.
Meantime, Hughes noted: “Some structures are being eliminated or jettisoned. A typical example would be Pearson Education at Saddle River, which has been knocked down.”
He called the billions of dollars in tax credits, via the EDA or other entities, a necessary cost of doing business.
“New Jersey’s a high-tax environment,” Hughes aid. “New York is not sitting back, Pennsylvania is not sitting back, and these other states are offering similar packages.”
But measuring the effectiveness of tax credits and incentives can take decades, Richardson said, because they extend over several years or even decades.
“[Incentives] have to be measured over the long term, based on jobs created, ancillary economic development activity, new business formation and other real estate development,” he said. “So only time will tell.”