SADDLE BROOK, NJ—The New Jersey office market continued to stabilize during the third quarter, primarily driven by bullish activity in the financial services and insurance sectors supplemented by strong activity in the publishing and marketing industries, according to the CBRE New Jersey Office MarketView Report. While market conditions have generally remained consistent, the Q3 transaction highlights bode well for New Jersey's office market in the coming quarters.

During the quarter, five major transactions led the way in office leasing activity: John Wiley & Sons renewed 386,000 square feet at 111 River Street in Hoboken; Royal Bank of Canada picked up 193,067 square feet at 30 Hudson Street in Jersey City; Prudential Financial significantly expanded its footprint in Newark; United Water picked up 116,360 square feet at 461 From Road in Paramus; and Active Media renewed 96,500 square feet at 1 Blue Hill Plaza in Pearl River.

The average asking lease rate, now at $24.75 per square feet, has increased for four consecutive quarters and is at its highest since Q3 2009. The market closed the quarter with 1.39 million square feet of new leasing activity, with the state's core submarkets – Waterfront, Morristown, Princeton, Parkway Corridor and Central Bergen – continuing to attract the majority of demand from investors. Office properties in these key submarkets account for more than one-third of the total New Jersey office inventory and have attracted approximately 56% of the state's leasing velocity to date in 2014.  

“While there are a number of reasons for enhanced activity in these five New Jersey submarkets, the Grow NJ Assistance Program continues to reinforce its position as a key driver, particularly in these areas,” says Carl Eriksen, executive vice president, CBRE. “Four of the top 20 office transactions completed in New Jersey in the third quarter were prompted by Grow NJ tax credits, demonstrating their influence in the market.”

Six companies received a total of $105.69 million in Grow NJ tax credits in the third quarter, representing a total of 654 jobs retained and 1,200 jobs created. The most recent unemployment rate in New Jersey reached 6.5%, an improvement of 140 basis points from the year prior.

Over the past five years, the annual office availability rate remained flat in New Jersey, ranging between 21.3% and 21.6%. In Q3 2014, availability remained consistent, as new space on the market continued to cancel out increased activity. The 169,602 square feet of negative absorption recorded in the third quarter were primarily the result of space hitting the market in the northern portion of the state. During the third quarter, four blocks of space larger than 100,000 square feet were added to the available inventory: 256,750 square feet at 169 Lackawanna Avenue in Parsippany; 225,999 square feet at 225 Brae Boulevard in Park Ridge; 154,776 square feet at 10 Park Avenue in Morristown; and 144,379 square feet at 4 Becker Farm Road in Roseland.

“While overall absorption in the third quarter was negative, the volume of large tenants actively engaging the market substantially increased, with nine new tenant requirements greater than 50,000 square feet,” says Joe Sarno, executive vice president, CBRE. “During this same period last year, we saw only two new requirements of this size. We're confident that as office activity continues to grow, the core submarkets will continue to attract the majority of demand and lead the way for future positive momentum in the state.”