PARSIPPANY, NJ—New Jersey's office market recorded its best annual year-over-year vacancy rate improvement in 10 years in 2014, according to Transwestern'sFourth-Quarter 2014 Office Market report. Matthew Dolly, research director for Transwestern's New Jersey office, says industries that fill office space are still not getting sufficient job growth to keep the office market moving forward.

Increased leasing velocity in downtown submarkets and transit-friendly suburbs such as Morristown and Woodbridge/Metropark propelled the vacancy rate to 16.2 percent as of fourth-quarter 2014. This compares to 16.8 percent at year-end 2013, representing the best annual decrease since 2005. Other sectors of the office market are also performing well:

• Asking rents averaged $24.96 per square foot at the end of fourth-quarter 2014 – the highest level in more than five years – partially due to accelerated leasing momentum in downtown submarkets such as the Hudson Waterfront and Morristown.
• In many of the suburbs, recent property improvements contributed to increased average asking rents.
• The market was buoyed by a number of large renewals during the fourth quarter, namely Prudential's extension totaling nearly 300,000 square feet at Two and Three Gateway Center in Newark. Additionally, Novartis Consumer Health will remain in its 153,734-square-foot space at 200 Kimball Drive in Parsippany.
• Total sales volume for 2014 reached the highest annual total since 2007, despite a slowdown in the fourth quarter due to scarcity of quality inventory.
• Sale prices averaged $146 per square foot during the fourth quarter – the highest since third-quarter 2012.

“Companies are measuring the worth of leaving the suburbs for a downtown facility with the convenience and mobility to attract young talent,” says Jim Postell, a principal in Transwestern's Tenant Advisory Services and Agency Leasing groups. “Suburban office markets in New Jersey are becoming more competitive as savvy landlords add high-quality amenities and services to compete with downtown facilities. This could include Wi-Fi, fitness centers, shuttle services and dry cleaning.”

“Although New Jersey's office market continues to improve, industry sectors that fill office buildings are not experiencing adequate job growth,” says Matthew Dolly, research director for Transwestern's New Jersey office. “The state is combating high business costs through The Economic Opportunity Act of 2014, Part 3 and changes to the Economic Redevelopment and Growth and GROW NJ tax credit programs, placing less of an emphasis on retained jobs.”