Office Market Pauses, While Industrial Leasing Remains Strong
On Jul 1, 2026The Northern and Central New Jersey commercial real estate market delivered a mixed performance during the second quarter of 2026, according to Cushman & Wakefield (C&W). The office market experienced a temporary slowdown following a year of improving occupancy, while the industrial sector continued to benefit from healthy tenant demand and sustained leasing activity.
The region’s office market recorded 929,245 square feet (sf) of negative net absorption during the quarter after posting four consecutive quarters of positive absorption totaling approximately 1.5 million square feet (msf). Vacancy increased 60 basis points quarter-over-quarter to 22.0%, driven largely by several large blocks of space returning to the market. Despite the increase in availability, leasing activity reached 1.6 msf, up 33% from the previous quarter, with Class A properties accounting for more than half of all leasing volume.
“The second quarter reflects more of a pause than a reversal,” said Bill Simoneau, senior research manager at C&W. “Large space returns pushed vacancy higher, but leasing activity actually accelerated and continues to favor well-located, high-quality Class A buildings. Companies remain willing to commit to quality space when it supports their long-term workplace strategy.”
Rental rates softened modestly during the quarter, with average asking rents declining to $32.29 per square foot (psf). Class A assets continued to command a premium, averaging $36.15 psf. The largest office transactions included ACE American Insurance’s 117,280-sf renewal at 10 Exchange Place, Englewood Health’s 101,325-sf sublease at 930/940 Sylvan, and Capital Health’s 72,000-sf new lease at 275 Phillips Boulevard.
Industrial fundamentals remained comparatively strong during the quarter as occupier demand continued to support leasing across Northern and Central New Jersey.
Warehouse and distribution leasing totaled 7.3 msf during Q2, bringing year-to-date leasing activity to 16.0 msf, a 42.6% increase over the same period last year. Third-party logistics providers and logistics users led demand, followed by retailers. Meanwhile, vacancy declined 50 basis points year-over-year to 9.3% as several large vacant blocks were leased despite an increase in sublease availability. Net absorption remained positive for the second consecutive quarter, totaling 416,739 sf.
“Industrial demand continues to normalize following several years of exceptional growth, but tenant activity remains healthy by historical standards,” said Felix Soto, Industrial Research Manager at Cushman & Wakefield. “The market continues to attract large occupiers, and the fact that more than half of this year’s completed construction has already been preleased underscores the ongoing demand for modern, high-quality logistics space.”
Notable industrial transactions during the quarter included Amazon’s 1.1-msf renewal in Carteret, Elogistics’ new 800,000-sf lease in Perth Amboy, and Worldwide Logistics’ new 451,916-sf lease in Sayreville. More than half (55.6%) of industrial space delivered year-to-date has already been preleased, highlighting continued tenant demand despite a more balanced market.
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