With the exception of the 6,400 jobs shed in April, the New Jersey employment market recorded job gains during seven of the first eight months of 2018. Approximately 48,900 total jobs had been added since the beginning of the year. However, employment growth fluctuated on a monthly basis. Nearly 60 percent of the state’s year-to-date job gains occurred in January and February, as the volume of new jobs decelerated during subsequent months. Less than 2,000 jobs were added during August. Recent job gains have also varied by business segment. With 21,600 new jobs during the past year, education & health services generated the largest gain, followed by 16,000 new jobs in the trade, transportation & utilities sector. The professional/business services, information and financial activities segments, which are among the leading driver of office demand, collectively added less than 9,000 new jobs.
After registering more than 1.5 million square feet of negative absorption during the first half of 2018, an uptick in demand produced more than 661,430 square feet of positive net absorption in the northern and central New Jersey office market during the third quarter. This represented the largest volume of absorption since the third quarter of 2017. More than 90 percent of the third quarter absorption was attributed to activity in the Parsippany and Route 80/23 submarkets, where Teva Pharmaceuticals and Ralph Lauren tapped state economic incentives to sign the two largest leases of the third quarter.
In Parsippany, Teva inked a 345,500-square-foot renewal and expansion at 400 Interpace Parkway – MCC BLUE after being awarded a 10-year $40.0 million tax credit. The Israel-based generics manufacturer will be moving its U.S. headquarters from Pennsylvania as part of the expansion. While the Parsippany Class A vacancy rate retreated below 31 percent, compared to more than 34 percent at mid-year, this vacancy rate remained more than five percentage points higher than the state’s Class A vacancy rate of 25.5 percent. In the Route 80/23 submarket, Ralph Lauren leased an entire 255,000-square-foot building at ON3, the former Roche campus being redeveloped in Clifton and Nutley. The luxury fashions company received a 10-year $33.1 million tax credit to relocate from Lyndhurst. The northern and central New Jersey overall office vacancy rate subsequently declined 50 basis points from mid-2018 to 23.6 percent, which was the lowest level in nearly a decade.
After trending lower for the past three quarters and falling to 18.0 percent by mid-year, the Hudson Waterfront Class A vacancy rate changed course and climbed to 18.6 percent as consolidations outpaced demand. More than 111,780 square feet of negative net absorption was registered in the Waterfront Class A market during the third quarter, which represented the largest volume of negative absorption in Northern New Jersey. Contributing to this negative absorption was 114,820 square feet of direct space vacated by Goldman Sachs at 30 Hudson Street in Jersey City.
On the Waterfront leasing front, E*Trade Financial Corporation signed a 106,000-square-foot renewal and 26,000-square-foot expansion at Harborside Plaza 2. The online brokerage and financial services firm received a 10-year $20 million tax credit to move 250 customer service jobs from the Philippines to Jersey City. Jet.com also expanded into an additional 42,000 square feet at Waterfront Corporate Center II in Hoboken. The e-commerce company now occupies more than 200,000 square feet within two of the three buildings at the complex.
The northern and central New Jersey average asking Class A rental rate for direct space approached $30.50 per square foot compared to $30.35 per square foot at mid-year. With an average asking rental rate of nearly $45.00 per square foot, the Hudson Waterfront maintained the highest Class A rental rate in the state. With an average asking rental rate just below $34.55 per square foot, the Metropark submarket recorded the highest asking Class A rental rate in central New Jersey. This was approximately $6.50 higher than the central New Jersey average Class A asking rent.
Approximately 489,730 square feet were under construction in the northern and central New Jersey office market during the third quarter. The 402,530-square-foot Ironside Newark redevelopment project accounted for most of this new development. Mars Wrigley Confectionery US had pre-leased 148,460 square feet at the building last quarter.
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