CBRE has released its Q3 2023 Office Figures report for the Northern and Central New Jersey office markets, which show economic headwinds are causing a pull back in the overall leasing market.
At 839,000 sq. ft., total leasing activity during Q3 2023 was down 44% from Q2. As a result of lackluster leasing and new blocks of office space coming to the market, New Jersey posted negative net absorption of 288,000 sq. ft. during the third quarter. On a positive note, renewals totaling 434,000 sq. ft. were up 60% quarter-over-quarter, bringing the year-to-date total to 1.25 million sq. ft. Average asking rent of $31.77 per sq. ft. is up 5% from the same time last year.
“Economic uncertainty continues to have an impact on the office leasing market,” said Matthew Saker, CBRE senior vice president. “Bright spots do exist, with robust renewal activity and a flight-to-quality for new commitments, as well as improved sublet leasing volume with tenants re-occupying sublease space that resulted in a 3.2% quarterly decline in available sublease space. Also, the market’s average asking rent has remained steady despite the challenges. We anticipate the same scenario to continue through the end of the year, with glimmers of light starting to peak through early 2024.”
Northern Jersey had the highest leasing activity during Q3. Totaling 573,000 sq. ft., leasing in the submarket accounted for 68% of the quarterly total in the state. Most of the activity occurred in the Waterfront, where 118,000 sq. ft. of leasing activity took place—an 88% improvement quarter-over-quarter driven by a 40,000 sq. ft. sublease at 221 River Street by Hain Celestial Group and a 30,000 sq. ft. lease by International AIDS Vaccine Initiative at 95 Greene Street in Jersey City.
In contrast, Central Jersey experienced a 57% drop from Q2 leasing activity, ending Q3 at just 266,000 sq. ft. Princeton led Central Jersey leasing activity for the quarter with 93,000 sq. ft., 29% above the five-year quarterly average. The 53,000 sq. ft. commitment from Dr. Reddy’s Laboratories at 600 College Road East in Plainsboro was the largest new deal of the quarter.
On the investment sales front, high interest rates continued to impact activity. Total investment sales in Q3 totaled $124 million. The largest deals during the quarter were the $46 million sale of Plaza 6 at Harborside, a 245,364 sq. ft. property in Jersey City, to American Equity Partners from Veris Residential; and the $49.75 million sale of The Business Center at Edison, which is expected to be converted to industrial use.
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