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NJ Office Leasing Slows in Q2 2015, But JC Remains Active

New Jersey’s three major submarkets – Jersey City, Metropark and Princeton – all remained active during the second quarter of 2015, but, overall, leasing momentum has slowed down in the Garden State.

According to Savills Studley’s just-released Northern New Jersey office sector report, office leasing volume barely exceeded 1.0 million square feet in the second quarter of 2015, as very few larger leases were completed in the quarter. Tenants have leased 8.3 million square feet in the last four quarters, nearly 20 percent below the market’s long-term annual average of 10 million square feet leased.

The region’s overall availability rate increased by 0.3 pp to 26.4 percent. Class A availability jumped to 0.5 pp to 26 percent. However, class A availability in the Hudson Waterfront fell by 0.8 pp to 15.6 percent.

Highlights from the report include:

·         SUSTAINED ACTIVITY IN JC. The “sixth borough” is generating lots of momentum because of new retail and residential developments around Exchange Place, Newport, Grove Street and Journal Square. New York Life Insurance, for example, signed an 114,691 square-foot lease at 30 Hudson Street in JC during Q2 2015 and will move 325 employees from Parsippany. Other firms are expanding in JC, like First Data Corporation, which will nearly double its occupancy at 101 Hudson Street, adding 24,221 square feet on the 40th floor.

·         BRICK CITY LEASING IMPROVES A BIT.  Newark saw a 90,000 square-foot renewal by the New Jersey Board of Public Utilities, and Standard Chartered Bank expanded by nearly 14,000 square feet at 2 Gateway Center.

·         RENTS FLAT. The average asking rent for the region inched up by 0.6 percent to $26.08. Class A asking rent ticked down by 0.3 percent to $26.85 but class B and C rent jumped by 3.9 percent to $23.36. The Hudson Waterfront is the only submarket to post a significant increase in class A rent (up by 20 percent) over the last four quarters.

·         HOPE FOR THE ‘BURBS. Despite the urbanization trend in the commercial office world, several companies are venturing into the suburban office complex. The largest deal of Q2 2015 – Mesirow Realty’s $650.3 million sale/leaseback of Verizon Communications’ headquarters in Basking Ridge set a record price tag for a single asset in suburban NJ at $456/sf. In addition, Vision Real Estate and Rubenstein Partners broke ground on MetLife Investments’ new 185,000 square-foot headquarters on a 14-acre site in Hanover.

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