MORRISTOWN, NJ-In its latest report, Avison Young documents an uptick in interest for health care and life science real estate in New Jersey that is helping to resuscitate the commercial office market. AY reports a dip in overall office vacancy to 21% from 21.4% in the second quarter.
As GlobeSt.com has been reporting (see updated stories), there has been considerable activity for healthcare space located near major medical centers.
"I don't know if we're at a crescendo yet," said Jeffrey Heller, AY's managing director in New Jersey. "But it's really where the high level of activity is coming from in the marketplace.” He said there the activity involves both increased interest from tenants and buyers, who are looking to acquire properties for repositioning.
The firm's Morristown office said that five of the top six lease transactions in northern New Jersey during the second quarter were healthcare/life science deals:
- Spectra Laboratories and Pfizer leased new space; Summit Medical Group announced it will take 100,000-square-foot space at a building in Florham Park to be constructed by the Rockefeller Group.
- Memorial Sloan-Kettering took possession of the 287,000-square-foot former Lucent Technologies facility in Middletown, which it will convert to a cancer treatment center.
Several more large tenants are currently searching for space. Heller identified Valeant Pharmaceuticals International Inc. as being in the market for 150,000-200,000 square feet. Valeant's subsidiary, Bausch & Lomb Holdings, recently sub-leased, 90,000-square-foot space in Warren.
Heller said brokers are also seeing rising interest from smaller tenants, such as urgent care groups, dialysis centers and sports medicine practices.
"It seems like there's a need for that type of space," Heller said. "They're either going to existing medical office buildings, in which space is tight, or investors are now converting some of their obsolete office-type properties to medical."
The dip in the overall vacancy rate, while only 0.4%, is the biggest for New Jersey's office market since the third quarter of 2011.
Matthew Dolly, AY's president of research, said health care and life sciences are expected to help shave office vacancy further in the coming year. The Affordable Care Act, which takes effect Jan. 1, is now considered a done deal, he said.
"People were holding back, but now it looks like the deals are coming to fruition," Dolly said.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
