Millennials Still Desperately Seeking New Jersey Transit-Oriented Business Hubs, Says JLL Study

Jones Lang LaSalle’s Rob Kossar, left, and Steve Jenco

PARSIPPANY, NJ— Demand for office space in northern, central, and suburban New Jersey transit hub markets remains strong, as millennial office workers continue to demand working environments that combine flexible design with multiple transportation options and a broad array of on-site amenities, according to On Track: Green signals and clear tracks ahead for state’s transit hub markets, a research report from Jones Lang LaSalle’s New Jersey team. The overall vacancy rate in transit hub office markets runs around 16.9 percent, vs. 27.5 percent for suburban office space not linked to transportation centers, JLL researchers Rob Kossar and Steve Jenco tell GlobeSt.com in an exclusive interview . Asking rental rates for transit-oriented offices average $30.32 per square foot, compared with $23.68 in the less-desirable suburban properties, the report says. “What makes it really diverse for our market is that depending on what corporations are needing, what type of employees they are recruiting for, where they need to be, the state has a diversity of transit markets that are really fitting the different needs,” says J enco. “If you need that proximity to Manhattan, you’ve got Jersey City, you’ve got Hoboken, but at the same time if you’re looking for a central location, where you’re consolidating between northern New Jersey and Southern New Jersey, you’re going to look more at the Princeton area, or the New Brunsiwkc or Metro Park area. As a result, we’re seeing the vacancies going down in these areas. It’s really pushing up rental rates as well.” Part of the lower vacancy, particularly in urban transit hubs like Jersey City and Hoboken, has to do with economic incentives given to companies to bring jobs there, the report says. In Jersey City, JPMorgan Chase scooped up $187 million in Grow New Jersey incentives to expand its offices, and New York Life got almost $34 milllion to move its offices from Parsippany. Meanwhile, suburban transit hubs including Metropark, Morristown, Princeton, and Summit, experienced positive net absorption of more than 484,000 square feet, driving vacancy rates down from 21 percent in 2014 to 17.5 percent last year. The persistent question of what happens when millennials start raising families and thinking about that suburban lifestyle from their childhoods doesn’t seem to be a big concern. “I think millennials are delaying that move to the suburbs,” says Kossar . “I think there’s a good argument to be made that a proportion of them will be perennial urban dwellers, but for most I feel it is a delay. There’s an effect on the office market, there’s an effect on the residential market. At the same time, we’ve seen such extraordinary momentum in our CBDs, the offices right around the transit hubs doing exceptionally well.” Towns hosting the once-popular suburban office parks need to realize that these properties will never have the same stature—or pay the same taxes—as they once did, says Jenco. “We’re entering a cycle now where we’re going to see more redevelopment aspect of it, because we don’t have the new construction from a speculative standpoint of the class A space that’s in high demand right now from companies,” he says. “What we’re going to see is a transformation of our suburban markets away from the campus of the 1980s. I think you’re going to see more of a hybrid of a suburban market. We want retail, we want residential, we want the amenities, we don’t want to have an office building sitting in the middle of nowhere with nothing around it, so I think you’re going to see the transformation of these suburban campuses.”