Pent up demand for Class A space is driving up asking rents and accelerating leasing activity, contributing to the New Jersey office market’s best third quarter since 2003, according to Transwestern’s Third-Quarter 2015 Office Market report. The strong activity resulted in approximately 880,000 square feet of positive net absorption – the highest level since second-quarter 2014.
“The New Jersey office market was extremely active this summer, as large companies continue to choose the Garden State as a strategic location to grow and run their operations,” said Transwestern’s James Postell, partner and leader of the New Jersey office. “Life sciences, healthcare and medical companies such as Valeant Pharmaceuticals, Celgene, Memorial Sloan Kettering Cancer Center and Zoetis remain active in the region, and many are benefiting from the state’s economic incentives.”
Year-over-year, net absorption is approximately 1.8 million. It marks the fifth straight quarter of year-over-year absorption exceeding 1.4 million square feet.
“Despite the positive absorption this past quarter, outdated New Jersey office stock continues to remain vacant, and if not addressed, this will certainly tarnish the progress the market has made,” said Matt McDonough, managing director at Transwestern. “Lease-up is often incumbent upon flexibility, and in many cases, tenants are now investing their own capital on fit-outs to get exactly what they want.
With some businesses choosing to downsize into more efficient space, owners across the state are responding by adding desirable amenities in order to compete. While corporate consolidations remain a concern, transit-oriented and recently renovated office properties are commanding higher lease rates, prompting more owners to invest in capital improvements. In that vein, developers and investors are likely to redevelop properties to accommodate the growing number of medical office tenants.
While some municipalities are forming councils to proactively inspire growth within their towns, the New Jersey Partnership for Action continues to implement several incentive programs to reward growing companies within the state.Related Articles: