"The major indicator for a true national fiscal recovery will be a monthly trend in positive job growth and declining unemployment rates," Medina notes. "That said, a three-consecutive-month decline in New Jersey unemployment through February and considerable changes in the structure of the overall economy are promising. Yet companies need to expand, rather than consolidate, for the upswing to truly take hold for our industry."
The overall office vacancy rate in Northern New Jersey, now 16.4%, represents a 0.5% decline since year-end 2009 and the lowest rate since first quarter 2009. At the same time, the overall weighted average asking rental rate dropped by $0.23 per square foot from the end of last year to a current $25.79 per square foot. "Office leasing in most northern markets maintained some resiliency, with Morris County leading the way and Bergen County close on its heels," Medina tells GlobeSt.com. In the largest lease of the quarter, Medco Health Services, a pharmacy benefit management company, took a full-building, 142,500-square-foot sublease at 225 Summit Ave. in Montvale. Additionally, United Parcel Service leased 118,000 square feet at 1655 Valley Rd. in Wayne. In Morris Township, at 445 South St., Travelers Insurance Company secured 105,000 square feet and Covanta Energy Corporation signed on for 104,839 square feet.
Meanwhile, the Central New Jersey office market still has rips that need to be mended, Medina says. The overall office vacancy rate in the central counties remained flat during the first quarter of 2010, registering 21%, while the overall weighted asking rental rate decreased by $0.48 per square foot since year-end 2009 to $22.82--falling below $23 per square foot for the first time since third quarter 2000. While Mercer and Monmouth counties each experienced a slight uptick in leasing, overall office activity in the central counties is off the mark set last quarter and represents a 42% year-over-year decline. The most significant new deal occurred at 110 Allen Rd. in Bernards Township, where multinational pharmaceutical company Celgene Corporation signed on for 42,743 square feet of sublease space. At 141 W. Front St. in Red Bank, Booz Allen Hamilton secured 23,566 square feet.
"As long as the current economic trend continues to favor companies requiring new space for expansion or consolidation, existing tenants will seek to lock-in current market rate value over the long-term," Medina notes. "The high vacancy rate in some markets provides the perfect arena for tenants to blend and extend their leases by way of early renewals and re-negotiation of existing lease terms." He adds that most landlords will continue offering this brand of flexibility to secure credit-worthy tenants for the long-term, rather than lose money in re-marketing space to potential higher-risk tenants.
While office construction remains nonexistent in the state's northern counties, activity in Central New Jersey, currently just below 500,000 square feet, is faring better than other markets. In Bridgewater, the 204,057-square-foot, build-to-suit for sanofi-aventis is progressing at 55 Corporate Dr., Building IV. In Woodbridge, MetroTop Plaza II, a 253,000-square-foot, speculative class A building is expected to be delivered by fall. In Edison, the redevelopment and expansion of the Hampshire Cos.' 98,459-square-foot Centra Business Park at 186 Wood Ave. S. broke ground in March.
On the industrial front, first quarter 2010 leasing in New Jersey saw an 11% year-over-year increase, with nearly 2.6 million square feet of activity. Deals in Bergen and Middlesex counties accounted for 1.63 million square feet of this total, with the lower 287 corridor experiencing significant activity. The largest industrial lease involved Merit Group, which secured an entire, 324,000-square-foot building at 1500 Rahway Ave. in Avenel. In Edison, Factory Direct of Edison leased 232,291 square feet at 3003 Woodbridge Ave., while Beaulieu of America Inc. signed on for a 122,301-square-foot, full property lease at 260 Meadow Rd. Further north, Production Resource Group took a 203,771-square-foot building at 915 Secaucus Rd. in Secaucus, while Exel Logistics leased 130,205 square feet at 251-259 Kapkowski Rd. in Elizabeth.
Within this context, direct triple net weighted average asking rental rates remained flat since year-end 2009, currently $6.02 per square foot. "Industrial market rents likely will remain steady over the next several quarters, with minimal increase, if any," Medina says. "An uptick in renewal activity is expected, as tenants continue looking to restructure leases in order to take advantage of the market," he adds. "Specific industries--primarily retail, shipping and logistics--will continue to keep leasing activity alive in areas such as Exit 8A and the port region, which have proven to be the nucleus of industrial activity in the Garden State."
Industrial construction centers primarily on data centers, and Russo Development is spearheading two projects worth noting. They include a 400,000-square-foot, build-to-suit data center for the New York Stock Exchange at 1700 MacArthur Blvd. in Mahwah, and a 285,000-square-foot data center for Credit Suisse, which is being constructed on the former Automatic Data Processing Inc. building site at 201 Main Ave. in Clifton.
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