SADDLE BROOK, NJ-Companies in New Jersey continue to flee to quality office space, driving office leasing velocity to the highest pace in four years, according to CBRE’s Fourth Quarter 2011 New Jersey Office MarketView.
Leasing activity totaled 1,988,855 square feet for the fourth quarter, surpassing the five-year quarterly average by 12.1%. Of the 7.26 million square feet of space leased in 2011, 72.8% occurred in class A properties, as did 22 of the year's top 25 transactions.
“The flight-to-quality is happening because there’s been so little construction, and these buildings from the 1980s are at the end of their useful life,” says Jeremy Neuer, senior VP, CBRE New Jersey.
Those buildings that cannot be updated will eventually drop out of the market altogether, says Joseph Sarno, executive VP, CBRE New Jersey.
“They will become some kind of alternative use,” Sarno says. “It will take a long time. It will be interesting.”
However, new construction isn’t completely dead, as 23.6% of the year's leasing velocity was committed to new construction or redevelopment projects. Four of the largest transactions completed last year, which totaled over 900,000 square feet, involved new construction, the report says. This pre-leasing activity in both the third and fourth quarters pushed the year-end velocity to the highest level in four years.
There will be some new development, but subsidies and incentives are a must, Neuer says.
“I think 2012 will be a good year in terms of deals being done,” Sarno says. “In 2008 and 2009 everyone cut as much as they could cut. The money is there, they’re just waiting to spend it.”
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