BRIDGEWATER, NJ-The 4th quarter of office leasing is unlikely to close as strongly as the 3rd quarter did – 1.7 million square feet is a lot to beat – but several new deals including SJP Properties' signing of Valeant last week indicate the office market continues to enjoy better health than it did one year ago.
SJP's deal with the pharmaceutical company was the largest office lease in the state for 2013, even after a very strong third quarter that ended in October. The pharmaceutical companytook a whole-building, 310,000-square-foot headquarters space at SJP's Somerset Corporate Center IV in Bridgewater. (SJP also got the nod to oversee the build-out of Valeant's new headquarters.)
In another transaction last week, CBRE Group completed two leases totaling 44,344 square feet at Perryville III at Crown Properties' Perryville Corporate Park in Hampton. Also, Cushman & Wakefield signed two new tenants for 8,500 square feet at Glenpointe in Teaneck, owned by Alfred Sanzari Enterprises.
CBRE says the office market has made “vast improvements” since last year. Third quarter leasing was up 72% over the same quarter in 2012, according to the company's Q3 analysis.
There was more than 1 million square feet of positive net absorption in the third quarter – and CBRE says that is the highest of any quarter since Q3 2006. Furthermore, it was only the third time in the past 10 years when net absorption exceeded a million square feet.
The trend this year turned toward fewer big blocks of space being put on the market, CBRE's Joe Sarno tells GlobeSt.com.
“We aren't seeing very many blocks of more than 100,000 square feet hitting the market, as many companies who occupy these spaces are actually renewing their leases,” says Sarno, CBRE's executive vice-president in the state.
He said renewals accounted for roughly 40% of the leasing activity through October of this year. Back in 2008, by contrast, renewals constituted just 20% of leasing.
The Meadowlands submarket had the most Q3 leases, a total of 233,566 square feet. The Princeton area was second, with 248,055 square feet.
Central Jersey had the most activity of any region, including these deals:
- Berlitz International's lease of 78,296 square feet in West Windsor.
- URS's renewal of 234,000 square feet in West Windsor, and
- AT&T's renewal 245,833 square feet in Piscataway.
The overall availability rate dropped below 21% for the first time since March 2009 in Q3, says CBRE. In the Route 17 Corridor submarket, availability tightened to 9.2%; in Montvale/Woodcliff Lake, it was 11.4%, and Princeton, 11.8%.
In 2014, the situation may shift again, according to CBRE's analysts. “It is anticipated that there will be a high volume of new office availabilities in the coming quarters,” the company notes in its Q3 report.
On the other hand, CBRE's Greg Barken says the state's beefed-up incentives programs, under the Economic Opportunity Act, may blunt the impact. “This program has the potential to boost demand and offset the negative impact of companies consolidating or relocating to smaller space,” he says.
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