Large renewals, state incentives, and investment sales, resulted in a strong fourth quarter in 2014 for the Northern and Central New Jersey office market, according to new research from Colliers International. With marked improvement in overall leasing and sales activity as the local and national economies continue to improve, significant confidence returned to the core New Jersey office markets.
With 3.7 million square feet leased, the fourth quarter of 2014 posted the year’s strongest leasing activity equating to a 42.3 percent increase over the 2.6 million square feet leased in the previous quarter. The fourth quarter of 2014 also posted the highest quarterly leasing activity since the fourth quarter of 2009, with renewals and lease extensions driving heightened activity.
Renewals accounted for 48.7 percent of all activity in Northern and Central New Jersey this quarter. Among the largest lease transactions completed, four of the top five were renewals: Prudential’s 135,000-square-foot renewal at 2 Gateway Center and its 160,008-square-foot renewal at 3 Gateway Center in Newark; Insurance Services Office’s 391,501-square-foot renewal at 545 Washington Boulevard in Jersey City; and Novartis’ 159,041-square-foot renewal at 200 Kimball Street in Parsippany.
Increased tenant activity resulted in positive net absorption for the second consecutive quarter, ending the fourth quarter at 413,712 square feet. Net absorption for the year ending on December 31, 2014 was positive for the first time since 2011, at 2.2 million square feet.
As the availability of big blocks declined, Northern and Central New Jersey’s overall availability rate decreased 70 basis points to 21.9 percent in the fourth quarter, down from 22.6 percent a year ago.
The intensified activity resulted in an increase in Northern and Central New Jersey’s average asking rent, reversing the declining rent trend of the past two quarters. In the fourth quarter, rents increased one percent quarter-over-quarter to $25.18/square feet from $24.93/square feet.
A significant driver of tenant demand throughout 2014, particularly on the Hudson Waterfront, has been the Grow New Jersey state incentive program. Charles Komar & Sons signed the largest new office lease this quarter for 159,141 square feet at 90 Hudson Street in Jersey City after receiving $37.2 million from the State. Charles Komar will relocate 500 employees to New Jersey after operating for 106 years in Manhattan.
Office Sales Indicate Confidence
Several notable office sale transactions closed in the fourth quarter, signaling investor confidence in core, stabilized, and value-add office assets in Northern and Central New Jersey. Among the largest:
“Financing continued to flow into value-add properties in Northern and Central New Jersey in the fourth quarter and throughout the year, which indicates that investor confidence has returned to the market,” said Robert R. Martie, Executive Vice President NJ Region for Colliers International. “The economy’s improvement, Grow New Jersey state incentives’ success, and renewed commitments by some of state’s largest office occupiers this quarter, signal a strong lead-in for 2015.”
Total employment in New Jersey surged by 6,700 jobs in November as the unemployment rate dropped by 0.2 percent, to 6.4 percent, the lowest level since October 2008. Nearly all of the gains were recorded in the private sector of the state’s economy.
Additional highlights from Colliers International’s 2014 Q4 New Jersey analysis:
Office leasing and sales activity along the Hudson Waterfront, Somerset/Route 78, and Princeton submarkets accounted for nearly half of Northern and Central New Jersey’s activity in the fourth quarter of 2014.
Northern New Jersey registered 2.6 million square feet of leased space in the fourth quarter of 2014, compared with 1.1 million square feet in Central New Jersey.
While the overall availability rate in Northern New Jersey crept up 20 basis points quarter-over-quarter to 23.5 percent, the rate was down 60 basis points from the prior year.
On both a quarter-over-quarter and year-over-year basis, the overall availability rate in Central New Jersey declined: 60 basis points to 19.6 percent quarter-over-quarter, and 90 basis points year-over-year.
The overall average asking rent in Northern New Jersey was $25.88/square feet, up 3.5 percent year-over-year from $25.00/square feeet, and 0.75 percent quarter-over-quarter.
The overall average asking rent in Central New Jersey increased 2.5 percent quarter-over-quarter to $24.44/square feet from $23.84/square feet in the second quarter, and 2.2 percent year-over-year.Related Articles: