Office space in New Jersey is being absorbed at a level unseen since prior to the recession, buoyed by significant activity in markets with proximity to New York City – most specifically on the Hudson Waterfront and near the George Washington Bridge – according to Transwestern’s First-Quarter 2017 Office Market Report.
Two-thirds of the submarkets covered in the report experienced positive year-over-year net absorption, contributing to a total of nearly 3 million square feet of absorption between the start of second quarter 2016 and the end of first quarter 2017 – the highest year-over-year total since the end of 2007.
Average rents in the market continued to climb during the first three months of the year averaging $26.38 per square foot – the highest level since third quarter 2008 and nearly 10 percent higher than the post-recession-low seen in 2011. Two-thirds of submarkets experienced both quarterly and year-over-year rent increases, with Somerset/Interstate 78 East, Parsippany Region and Bergen Central growing fastest.
“Leasing in New Jersey’s office market this quarter is being driven by retailers and consumer products companies, similar to what we are seeing in the industrial market,” said James Postell, Partner and City Leader of Transwestern’s New Jersey office. “While leasing has been substantially stronger in the northern New Jersey submarkets, we’re seeing rent growth almost everywhere.”
Leases signed during the first quarter by retailers and consumer product companies in the Hudson Waterfront submarket include:
In the George Washington Bridge submarket, the following deals were inked:
Only half of the state’s submarkets experienced improved occupancy as leasing activity was offset by space returning to the market. Overall, the market’s vacancy rate improved from 15.5 to 15.1 percent during the quarter.
“We’re anticipating slow growth for the remainder of 2017, as increased space availabilities are balanced out by the continued growth of New Jersey’s private sector, which added over 28,000 jobs in the first two months of 2017,” said Matthew Dolly, Transwestern’s New Jersey Research Director. “Sublease availability has been climbing slowly, and it remains to be seen how the market will absorb the space left behind by several significant company relocations. However, as creative office projects continue gaining popularity and office conversions take obsolete product off the market, potential increases in vacancy rates are likely to remain at a minimum.”
Additional highlights of the report include: