By Miles Berger
The City of Newark, New Jersey, is enjoying a renaissance punctuated by a tightened Class A office market, heightened entertainment and culture, and an enhanced transit infrastructure. Add to that skyrocketing lodging rates in Manhattan and an ever-expanding passenger volume at Newark airport, and the city’s hotel inventory — a sometimes overlooked component of its commercial real estate sector — is poised for new levels of growth and prosperity.
Traditionally, Newark’s hotel stock has been largely dependent on traffic from Liberty International Airport. While the airport continues to be a strong contributor to the city’s hotel industry, many other moving parts are in play, beginning with the resurgence of the office market.
The corporate migration toward cities continues in New Jersey, bolstered recently by programs like the state’s new urban tax incentive. Additionally, under the administration of Newark Mayor Cory Booker, the city has seen a strong increase in Manhattan firms interested in relocating their back office operations, and even their headquarters, to Newark. With New York City rents skyrocketing to approach $100 per square foot, Newark offers a tremendous alternative. Typically, B and C+ buildings run near $27 per square foot, with Class A rates at an affordable $34 per square foot. This represents a considerable savings in these challenging economic times.
With growing corporate presence comes heightened demand for lodging and conference facilities. The same holds true for overnight visitors, athletes and performers tied to Newark’s growing entertainment and cultural scene. Newark is home to three world-class venues — including the newly completed Prudential Center, Riverfront Stadium and New Jersey Performing Arts Center.
Additionally, Newark’s outstanding transportation links have made its hotels attractive satellite locations for visitors to New York City. Penn Station Newark connects to Penn Station Manhattan in 14 minutes. Broad Street Station connects to Midtown in about the same amount of time. Rates in Midtown Manhattan generally rise above the $500 per night category. Newark hotels, on the other hand, range from $140 to $250 per night for a standard room, making it a tremendous draw.
Returning to the topic of the airport, it is interesting to note that the bulk of the city’s hotel inventory is located in and around that facility. These hotels continue to thrive on serving the city’s pass-through visitors. Yet today, the average traveler arriving in Newark prefers to stay in the city as opposed to being at an isolated airport location. Therefore, downtown properties like the Best Western Robert Treat Hotel and others have been more successful in marketing to this clientele than ever before.
The result of these combined factors? A steady rise in occupancy levels and rental rates recorded over the past year. And owners are working to take advantage of this “perfect storm” to improve and expand Newark’s hotel offerings.
At the aforementioned Robert Treat Hotel — long recognized locally as a quality property with deep roots in Newark’s history — united with the Best Western brand in March, following a $5 million renovation. That affiliation with the largest global hotel brand is enabling the hotel to bring new business from both within and outside the city.
Additionally on the drawing board for the city is a hotel to be located next to Prudential Center. That new venue hosts 200 events per year as home of the New Jersey Devils and a stage for acts and shows coming to northern New Jersey.
Chicago-based Tucker Development is planning an adaptive reuse of the three-acre former Newark Holiday Inn site adjacent to Broad Street Station. The project will involve a mixed-use transportation hub complex, including a luxury hotel component along with retail and office space.
The northern end of Broad Street, located at the intersection of Interstate 280 and the Broad
Street Station is destined to become the next development site for the city and may well include additional hotel accommodations. Already, the demolition of the Lincoln Hotel and the old Westinghouse plant has created an energy that has caught significant attention from the real estate community. A joint venture of Mack-Cali Realty and the Braka Family is planning a mixed-use development for the Westinghouse site.
Looking even further ahead, the momentum that has taken hold in Newark will only serve to enhance its revitalization as a desirable location for business, entertainment, sports, culture, dining and shopping. It also will support the continued evolution of Newark’s hotel industry commensurate with its shift from a stopover location to a true 24/7 destination. In short, it is a terrific time to be involved in this sometimes under-recognized sector of commercial real estate in New Jersey’s largest and most exciting city.
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The Berger Organization, based in Newark and established in 1929, is a privately owned diversified real estate company that develops and manages approximately 1 million square feet pf residential, commercial and hospitality properties throughout Northern New Jersey and New York City.