Third-quarter office leasing activity in northern and central New Jersey topped 2 million square feet, pushing year-to-date volume to 6.2 million square feet – 8.1% ahead of last year’s pace, according to Cushman & Wakefield. The commercial real estate services firm today released its latest market research findings, which indicate a steady market heading into the final months of the year.
“Strong suburban tenant demand across the state countered some major blocks of space coming online as new vacancies,” noted Jason Price, Cushman & Wakefield’s director of Suburban Tri-State Research. “As a result, after hitting a recent vacancy low of 17.1% at mid-year, the rate ticked just slightly higher to 17.2%.”
Price noted that a handful of Central New Jersey submarkets have experienced notable increases in vacancy since mid-year, including Monmouth County, I-78 Corridor and the Upper 287 Corridor. As such, the region saw 461,561 square feet of occupancy losses and a vacancy rate increase of 90 basis points (to 16.4%). In contrast, Northern New Jersey space absorption totaled more than 507,000 square feet, and the vacancy rate fell 40 basis points to a seven-year low of 17.9%.
“Compared to one year ago, the state’s vacancy rate across all classes has improved steadily, and year-to-date net absorption now totals over 1.0 million square feet,” Price added. “This is well ahead of last year’s annual total.”
Five leases greater than 50,000 square feet – including two topping 200,000 square feet – fueled demand during the third quarter. Everest RE Group announced its relocation to more than 313,000 square feet at Warren Corporate Center in Warren Township, while CIT Group will move from Livingston to 200,000 square feet at 340 Mount Kemble Ave. in Morristown. These two transactions alone accounted for 24.8% of the state’s third-quarter new deal volume. Meanwhile, Samsung opted to remain at its current location in Ridgefield Park, inking a 235,000-square-foot renewal on Challenger Road.
“This marked the first time in three years that multiple new transactions of 200,000-plus square feet were inked in the same quarter,” noted Cushman & Wakefield’s Andrew Judd, New Jersey market leader. “And yet, while the large deals grab the headlines, it’s been a steady churn of small deals that have pushed leasing in the Garden State. Since the start of 2019, users leasing less than 10,000 square feet have represented 34.5% of tenant demand across all asset classes.”
During the third quarter, a handful of market segments experienced notably robust activity. The I-78 Corridor, Parsippany, Morristown, Bergen County, and Princeton/Route 1 all saw at least 200,000 square feet of leasing. Conversely, demand was tempered in some market segments as the Hudson Waterfront and Woodbridge/Edison experienced a slight lull, according to the Cushman & Wakefield findings.
Although minimally, New Jersey’s overall average asking rental rate continued to trend higher during the third quarter. The current $29.68 per square foot average, representing a 1.4% year-over-year rise, has been driven largely by an increase in Class A asking rents. Quarter-over-quarter, Northern New Jersey Class A rates climbed $0.05 to $36.28 per square foot, while Central New Jersey posted a $0.02 decline to rest at $29.30 per square foot.
“The trend of upgraded, amenitized office buildings achieving higher occupancies and stronger demand will continue as companies attempt to retain and lure new employees in the current strong job market,” Judd said. “This, combined with the expected positive state economic trending, is keeping landlords of Class A assets bullish – we may see them further raise asking rents in some cases.”
For the remainder of 2019, Cushman & Wakefield anticipates occupancy to remain steady, with no substantial vacancies projected to come online until early 2020.
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