EAST RUTHERFORD, NJ–Large blocks of vacant space continue to be a drag on the state office market, but demand is up enough to keep the overall vacancy rate flat at just under 20%, says Cushman & Wakefield in its assessment of first quarter activity.
JLL, which issued its own report on the Q1 office market Wednesday, says vacancy ticked slightly upward in Q1. However, JLL concurred that the wave of available space that hit the market last year appears to have crested, while demand is surging.
JLL says the vacancy rate for northern and central NJ increased to 25%, compared with 24.9 percent at year-end 2013. C&W's figures were very close to those.
On the demand side, C&W's Kimberly Brennan notes that there was more than 2.1 million square feet of leasing for the second consecutive quarter. “Last year ended on a high note in terms of activity, and we see that trend continuing in 2014,” she said. “The year-over-year comparisons are encouraging.”
There was negative absorption of 309,500 square feet, however, says the C&W Market Leader. She said most of that was concentrated in Hudson, Morris and Somerset counties. The building at 5 Giralda Farms in the Route 10/24 submarket that Pfizer previously owned and occupied added 460,000 square feet when it came online.
Year-over-year, all of the northern New Jersey counties with the exception of Bergen County had rising vacancy, according to C&W. “Bergen has been the most stable market segment in Northern NJ over the past few years, with steady leasing offsetting most of the notable spaces that have become available,” said Brennan.
In Central New Jersey, C&W says vacancy fell to 17.8%, due to the healthy demand in the Woodbridge/Edison, Princeton, and I-78 Corridor submarkets. Year-over-year, vacancy was down 3.1% in Hunterdon, 1.8% in Middlesex and 15.2% in Monmouth.
Brennan says incentives provided by the Economic Opportunity Act of 2013 will continue to spur activity.
On the other hand, JLL's NJ and Long Island market director Robert Kossar said, “The lack of sustained job growth continues to cast a shadow over New Jersey's economy.”
He said that “accelerating job growth in vital sectors — notably professional and financial services — will be crucial to jumpstarting the state's office market in the coming year.”
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