PARSIPPANY, NJ-New research from Colliers International suggests that the New Jersey office market is stabilizing, although marked improvement is critically dependent on the pace of economic expansion. Until then, landlords are continuing to lower rents, albeit just slightly, and offer more concessions in advance of lease expirations. Some tenants have already capitalized on this by seeking upgrades to their existing space.
Meanwhile, a few large tenants are helping to stabilize the office market. Watson Pharmaceuticals Inc. is expanding in Parsippany to approximately 148,000 square feet, and BlackRock Inc., which at one point considered relocating from New Jersey, recently leased 141,375 square feet at 1 University Square Dr. in Princeton. In addition, chemical company BASF Corp. is building a new $100-million, 325,000-square-foot headquarters building in Florham Park.
Several positive macro-economic trends may spur additional expansions. US businesses with fewer than 20 employees are continuing to hire, which extends an upward trend that began in mid-2009, according to the June 2010 small-business employment index from Intuit Inc. In addition, the state’s recent budget plan may encourage small companies to become more confident about hiring later in the year.
The overall availability rate in Central and Northern New Jersey increased slightly to 24.4% up from 23.9% at the end of the first quarter of 2010. Average asking rents, meanwhile, declined slightly to $23.08 per square foot, down from $23.24 per square foot. This downward momentum in asking rents has eased since the previous year, when they notched $24.32 per square foot at the end of 2009.
As some larger subleases have expired, much of the space that landlords had been competing with has now become direct space. As of the end of the second quarter, only 15.7% of the total space available was sublease, down from 20.97% a year ago. A growing volume of sublease space will be converted into direct space in coming months.
“Most observers believe that the New Jersey office market has bottomed out, but tenants are still hesitant to make deals because of a cloudy economic recovery,” says Matt Dolly, head of research for Colliers International New Jersey. “Landlords are thus working with tenants, hoping to keep them in place by reminding them that renewals offset moving costs associated with relocations.”
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