Strong Gains in Northern and Central New Jersey Office Market

On Jul 17, 2015

DTZ has released its Second Quarter New Jersey Office Snapshot, which reports tremendous improvements in the New Jersey office market with the highest absorption since Q1 2014 and an increase in asking rents to $26.60, compared to $26.28 the same quarter a year ago.

New Jersey experienced employment gains for the eleventh consecutive month with 12,200 new private sector jobs. The greatest growth in May was in the education/health services, professional/business services and financial services industries.

Northern New Jersey rebounded from 150,280 square feet of negative absorption during the first quarter of 2015 to 567,667 square feet of positive absorption in Q2 2015 and a decline in availability of 60 basis points to 25.2 percent. Although asking rents waned slightly in the region from $27.83 to $27.65 per square foot, increasing demand for higher-quality office space will push rents higher. The Hudson Waterfront and Meadowlands submarkets led 10 of the 12 submarkets that posted positive absorption in the second quarter. Availability decreased 140 basis points in the Hudson Waterfront as a result of several notable leases in the area. The Meadowlands submarket witnessed 85,266 square feet of positive absorption.

Investor confidence is strong in the Northern New Jersey office market with over $215 million in sales activity. Favorable conditions of rising employment and a strengthening economy are encouraging developers and tenants to enter the market. Three buildings currently under construction, two in Newark and one in Whippany, are already 100 percent preleased, supportive of the positive strength in the market.

As the Central New Jersey market continues to improve, investors are expected to become more active, and leasing activity should rise accordingly. In the second quarter of 2015, Central New Jersey experienced strong leasing activity. Availability declined to 23.7 percent with 241,009 square feet of positive absorption. Asking rents dipped slightly to $24.72 per square foot from $24.84 in the first quarter. The largest lease and the largest sale in the second quarter were both in the Somerset/Interstate 78 submarket. DTZ was the exclusive leasing agent for Center 78 in Warren for the 144,536 square foot lease with GlaxoSmithKline. The largest sale for the quarter, 1.4 million square feet at the Verizon Center at 295 North Maple Avenue in Somerset, was also the largest sale-leaseback ever in suburban New Jersey. Mesirow Financial bought the building for $650.3 million, and Verizon will lease back the campus for 20 years. Other notable second quarter statistics include Brunswick/Piscataway submarket availability dropping to 32.2 percent and Woodbridge/Edison submarket availability falling under 20 percent.

“We are seeing a growing confidence in the New Jersey office market,” said Raymond Trevisan, Managing Principal of DTZ. “As demand for high quality office space continues to grow, asking rents should inch up accordingly. Also, the positive impact of the Grow New Jersey investment program should continue to boost job creation within the state.”

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