With leasing at its highest annual total in a decade (10.9 million square feet), the New Jersey office market capped 2015 with continued progress, according to commercial real estate services firm Cushman & Wakefield. The company’s fourth quarter research findings show positive momentum across all market fundamentals heading into the new year.
“Overall net absorption finished in the green for the fourth consecutive quarter, with occupancy gains reaching just under 2.0 million square feet for the year – well above the 2014 total of 300,000 square feet,” noted Andrew Judd, Cushman & Wakefield’s New Jersey Market Leader. “Additionally, office vacancy fell by 1.4 percentage points since a year ago to 18.7 percent, its lowest point since 2011.”
Fourth quarter office leasing activity exceeded 2.1 million square feet, bolstered by six leases in excess of 50,000 square feet. This included a 205,000-square-foot commitment by the NJ Turnpike Authority at 1 Hess Plaza in Woodbridge and a 170,000-square-foot lease by Lowenstein Sandler at 56 Livingston Avenue in Roseland. Other sizable leases were inked by BMW, Bank of America, WeWork and NICE Systems.
“Activity here remains diverse in terms of industry type this quarter, with computer, legal and financial services accounting for much of the recorded deal volume,” said Cushman & Wakefield’s Jason Price, research director, tri-state suburbs. “Approximately 73 percent of office leasing volume during the final three months of 2015 was concentrated in class A space, as tenants continued their search for high-quality, modern space.” The Hudson Waterfront led the way, with just over 300,000 square feet of new leasing recorded. Woodbridge/Edison, Princeton/Rt 1, and the I-280 Corridor all exceeded 200,000 square feet in quarterly new demand.
Renewal activity also remained steady in New Jersey, with a handful of significant fourth quarter commitments to remain in place. Hudson News renewed and expanded for a total of 93,308 square feet at 1 Meadowlands Plaza in East Rutherford. Barnes & Noble opted to remain in its 81,054-square-foot space at 120 Mountainview Blvd. in Bernards Township, while Teva Pharmaceuticals signed a short term extension for 89,000 square feet at 400 Chestnut Ridge Road in Woodcliff Lake.
“The New Jersey office market is in fact stabilizing and improving substantially in some market segments,” Price said. “The fourth quarter of 2015 saw almost 245,000 square feet of net occupancy gains, with Bergen County’s Rt 17N/GSP submarket and Mercer County’s Princeton/Rt 1 Corridor each recording more than 100,000 square feet of absorption.”
The overall office vacancy rate tightened by 0.3 percentage points during the fourth quarter, as available space dwindled in both Northern New Jersey and Central New Jersey. Notable declines in vacancy occurred in Bergen County, Newark, the Meadowlands, Princeton/Route 1, and Woodbridge/Edison.
With quality space tightening and demand remaining strong, asking rents ticked higher during the fourth quarter, ending the year at $26.35 per square foot. “As the office market gains traction, so is competition for quality product,” Price said. “During 2015, class A rents in Northern New Jersey rose by 2.1 percent, while Central New Jersey saw a slight drop, mainly due to some higher quality space leasing up in that time. Class B rents have followed suit, climbing 2.2 percent over the past year.”
With the national and local economies anticipated to remain on course, Price anticipates that tenant demand for New Jersey office product will remain healthy in 2016. Still, he cautions that a number of large blocks coming online may slow the pace of the market’s improvement.
“The completion of the Bell Works campus in Holmdel will put more than 800,000 square feet of class A space on the market for lease, while Bristol-Myers Squibb’s upcoming relocation to its new build-to-suit headquarters will leave behind 650,000 square feet in Plainsboro late next year,” Judd added. “Still, despite these and a handful of other anticipated vacancies, New Jersey is poised to see occupancy gains during much of 2016. This should, in turn, maintain the current upward pressure on rents in the state’s major submarkets.Related Articles: