NJ Suburban Office Markets Reviving, CBRE Says

211 Mt. Airy Road, Basking Ridge, NJ

SADDLE BROOK, NJ — Several substantial headquarters transactions completed during the second quarter are leading CBRE to believe that New Jersey’s traditional suburban office markets are showing renewed signs of life. CBRE made the comments in its second-quarter New Jersey Office MarketView Report . During the second quarter, unlike previous quarters, New Jersey’s suburban submarkets, including Route 287/78 Interchange (386,946 square feet), Parsippany (303,785 square feet), Meadowlands (285,271 square feet) and Suburban Essex/E. Morris (214,969 square feet) recorded the highest levels of leasing in the state. These submarkets, which comprise 30.4 percent of New Jersey’s total office inventory, accounted for 55 percent of the state’s total leasing velocity, CBRE says. “Key office market indicators in New Jersey are at their strongest point in the past seven years— a fact that can be attributed to the robust demand we’re experiencing, paired with a dwindling supply, particular when it comes to Class A product,” says Greg Barkan , senior vice president, CBRE. “While New Jersey’s waterfront and ‘lifestyle’ markets have dominated leasing activity over the past several quarters, the state’s traditional suburban submarkets made an astounding comeback in Q2.” At 211 Mount Airy Road in Basking Ridge, global pharmaceutical company Daiichi Sankyo consolidated two New Jersey offices from Edison and Parsippany, placing its New Jersey personnel in a single 306,999 square-foot space. In Secaucus, clinical laboratory services company Quest Diagnostics’ 130,246 square-foot lease at 500 Plaza Drive was a prime reason that the Meadowlands submarket recorded its highest level of leasing velocity since the fourth quarter of 2004. Parsippany, Suburban Essex/Eastern Morris and the Waterfront all had a successful quarter as well, with each recording a leasing velocity above 150,000 square feet. In Hoboken, Newell Rubbermaid received $27 million in Grow New Jersey tax incentives that led the company to relocate employees from Atlanta, Connecticut and New York City to a new 99,975 square-foot global headquarters at 221 River Street . “Office tenants continue to make their real estate decisions with the employee and client experience at the forefront of the thought process,” says Joseph Sarno , CBRE executive vice president. “New Jersey’s office market offers these tenants the unique ability to create space efficiencies and house employees in a single, collaborative environment. As a result, we’re seeing these consolidations and headquarters relocations in both the lifestyle and suburban office markets.” Overall in New Jersey, leasing velocity, which totaled 2.16 million square feet in the second quarter, was historically high — 27.7% above the five-year quarterly average — leading to 181,521 square feet of positive absorption. The market boasts an overall availability rate of 20.6%, and an average asking lease rate of $25.56 per square feet—the eleventh consecutive quarter of positive rent growth. Class A product captured 79.8 percent of leasing velocity, while making up only 58.5 percent of the state’s inventory. CBRE , which is tracking more than 5 million square feet of current demand in the New Jersey office marketplace, anticipates strong leasing velocity for the remainder of the year throughout the state, which maintains a solid track record for attracting demand from outside the market, as well as for retaining tenants. More than 55 percent of second quarter lease commitments over 50,000 square feet received tax incentives from the Grow New Jersey Assistance Program, leading to the creation of 661 new jobs, and retaining 1,487 jobs in New Jersey. “Evolving tenant preferences and the desire for open and collaborative work environments will continue to invigorate New Jersey’s suburban markets,” Sarno says. “We expect this demand will further compress the availability rate in New Jersey, elevating the average asking lease rate to historical highs.”