Cushman & Wakefield has released its first quarter 2023 office and industrial statistics for New Jersey, showing sustained demand for high-quality office space, despite an increase in vacancies, and positive net absorption in the industrial market.
“Despite the increase in office vacancies, we are still seeing a flight-to-quality trend with continued demand for new, financially stabilized, top-tier offices in centrally located markets with best-in-class amenities,” said Todd Elfand, managing director. “Looking ahead, the office market is expected to continue its slow recovery as employers navigate the new normal of hybrid work arrangements.”
In the New Jersey office market, the vacancy rate increased for the third consecutive quarter to 21.2%, due to large blocks of sublease space returning to the market. As of Q1 2023, the available sublease space accounted for 4.6% of the office inventory, double the amount from Q1 2020, prior to the pandemic. The direct average asking rent remained stable, up $0.51 per square foot (psf) year-over-year to $31.25 psf, as newly vacant Class A space returned to the market.
Leasing slowed during Q1 2023, with leasing activity totaling 2.1 million square feet (MSF). Still, tour activity remained brisk, suggesting an uptick in demand during the second half of 2023. As return to office policies continue to evolve and hybrid work persists, office vacancies have increased. However, employers continue to exhibit sustained demand for new, high-quality offices. Tenant demand continued to focus on centrally located markets near a growing suburban workforce that offers amenities desired by today’s occupiers.
“The industrial market in New Jersey has remained resilient, with net absorption continuing its positive streak despite the wave of new vacant deliveries added to the inventory,” said Christine Eberle, managing director. “After a historic 2022, we are seeing leasing activity revert to previous norms but with sustained demand as both asking and taking rents continuing to rise across core submarkets.”
The industrial market in New Jersey saw a steady increase in vacancy rates from historic lows in 2022, largely due to the influx of new vacant deliveries. However, the vacancy rate remains below 4% in both Northern and Central New Jersey. The warehouse sector has witnessed fast-paced delivery, with many warehouses leased shortly after completion.
Overall net absorption for warehouse space in New Jersey continued its positive streak and was driven by positive momentum in Central New Jersey, which recorded over 2 MSF of occupancy gains. However, Northern New Jersey recorded negative net absorption for the quarter, which was driven by the acceleration of newly vacant space together with slower demand. Leasing activity reverted to previous norms after the pandemic-era boom. At 5.3 MSF, leasing activity was above the four-year trailing average of 4.6 MSF, with Central New Jersey driving demand.
Newly available subleases continued to return to the market this quarter as vacancies increased. However, the market has exhibited demand for sublease space, evidenced by SupplyOne’s 175,000-square-foot sublease at 150 Milford Road in East Windsor.
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