EAST RUTHERFORD, NJ – Third quarter market data from Cushman & Wakefield shows a generally slower pace for office real estate around the state so far this year.
“Despite a significant addition of private sector jobs and other signs of economic improvement, New Jersey faces an unemployment rate of 9.8%, which is well above the national average of 7.8%,” said Gualberto “Gil” Medina, executive managing director of the firm’s New Jersey operations. “Jobs are the key driver for real estate."
For both the office and industrial real estate markets, sluggish Q3 activity reflected an overall economic climate of “modest recovery tempered by continued uncertainty,” said the report from the firm’s East Rutherford-based research services team
Medina cited uncertainty over the outcome of presidential race as a factor: “Many landlords and corporate decision-makers are inclined to wait for an outcome before making major moves.” Thus, C & W predicts, the burst of activity that occurred at the end of 2011 is unlikely to recur this year.
In the northern part of the state, leasing activity was down 28% so far this year compared to the same period in 2011. Only 2.7 million square feet of space has been committed since January.
In the largest leases of the third quarter, KPMG took 51,562 square feet at 51 JFK Parkway in Short Hills, and Prudent Publishing Company committed to 34,137 square feet at 65 Challenger Road in Ridgefield Park.
“Leasing remains low even in Northern New Jersey’s traditionally active submarkets like the Hudson Waterfront,” Medina said. “As a result, occupancy is flat, and rents are experiencing downward pressure.”
The total vacancy rate in the northern counties held steady at 17.9% from year-end 2011. The average asking r rate – currently $25.69 per square foot – dropped $0.23 per square foot since mid-year and $0.12 per square foot since the end of 2011.
C & W said a few lease renewals were “bright spots” in the lackluster picture:
- PSE & G, for 825,000-square-foot at its 80 Park Place headquarters in Newark.
- Novartis Pharmaceuticals Corporation, for 160,000 square feet at 180 Park Avenue in Florham Park.
Investment activity proved strong in northern NJ, with 11 properties and nearly 1.2 million square feet traded. American Realty Capital Trust executed the largest transaction when it acquired 2-4 Mill Ridge Office Center in Chester from Devan Gardens LLC for $10 million.
The report on central New Jersey basically provided a “mirror image,” said C &W’s report, with nearly 2.4 million square feet of space committed in the central counties. The two largest leases of the quarter were at MetroTop Plaza II in Woodbridge. The most substantial renewal was Barnes & Noble’s 73,626-square-foot re-commitment at 120 Mountainview Boulevard in Bernards Township.
“Occupancy continues to rise in Central New Jersey, with the total vacancy rate dropping 1.6 percentage points year-over-year to a current 19.0%,” Medina said.
Yet sales activity in Central New Jersey has been slow compared to 2011. The largest trade of the quarter was Asbury Bond Street’s purchase of a 50,000-square-foot building in Asbury Park from DRLA.
“Despite the wait-and-see attitude that is tampering activity levels, office market fundamentals should improve modestly statewide in the coming months,” Medina said. “We fully expect that 2013 will bring substantial momentum.”
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