PARSIPPANY, NJ—Renewed interest in New Jersey's suburban office properties, combined with consistently strong leasing activity downtown, has pushed average asking rents for office space to $26.42 per square foot, according to Transwestern's Second-Quarter 2017 Office Market Report. Nearly $2 higher than it was just five years ago, the figure represents the market's highest mid-year level since 2001.
Small- and mid-size tenants are eschewing the downtown markets in favor of lower rents in the suburbs, where property owners have invested significant capital to redevelop and modernize buildings to meet the standards of today's tenant.
With downtown and suburban submarkets flourishing, New Jersey's office vacancy rate improved slightly during the second quarter, from 15.1 percent to 15 percent. During the past 12 months, more than 2.7 million square feet of space has been absorbed, marking the second-highest year-over-year total since 2006.
“The quality of New Jersey's suburban office stock has dramatically improved, and property owners are now reaping the benefits of their repositioning initiatives,” says Matt McDonough, managing director at Transwestern. “Although the younger population wants to live downtown, many employers remain inclined to choose a location that suits its existing employee base, which means finding suitable space in the suburbs.”
The largest lease of the second quarter was a renewal signed in central New Jersey, as AT&T agreed to remain in Piscataway. The largest new lease occurred in Newark, where Newark Public Schools committed to a relocation within the city that is anticipated to save taxpayers approximately $2 million per year.
New Jersey continues to shine as a life science destination as several pharmaceutical firms completed recent deals throughout the state, including Otsuka Pharmaceutical, Celgene, Johnson & Johnson, Rising Pharmaceuticals and Zoetis.
“Second-quarter leasing velocity in New Jersey outpaced the first quarter, with new deals making up two-thirds of the transactions,” says Matthew Dolly, Transwestern's New Jersey research director. “Much of the success can be attributed to the market's diversity, which is its greatest strength. The reimagined and modernized office product is making for a tremendous draw, and the large variety of industries active in the state plays a significant role in the heightened leasing activity.”
Additional highlights of the report:
- While the suburbs are gaining strength, the Garden State's communities with train stations are thriving, attracting residents who desire easy access to NJ Transit and Manhattan. However, with infrastructure upgrades scheduled for this summer, there are concerns about commuting delays.
- Rents continue to climb in transit-accessible markets such as Woodbridge/Metro Park, Morristown and the Hudson Waterfront, where the average asking rent exceeded $40 per square foot for the first time with some leases exceeding $50 per square foot.
- Overall, rents in New Jersey have increased in seven of the past eight quarters.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Steve Lubetkin
Steve Lubetkin is the New Jersey and Philadelphia editor for GlobeSt.com. He is currently filling in covering Chicago and Midwest markets until a new permanent editor is named. He previously filled in covering Atlanta. Steve’s journalism background includes print and broadcast reporting for NJ news organizations. His audio and video work for GlobeSt.com has been honored by the Garden State Journalists Association, and he has also been recognized for video by the New Jersey Chapter of the Society of Professional Journalists. He has produced audio podcasts on CRE topics for the NAR Commercial Division and the CCIM Institute. Steve has also served (from August 2017 to March 2018) as national broadcast news correspondent for CEOReport.com, a news website focused on practical advice for senior executives in small- and medium-sized companies. Steve also reports on-camera and covers conferences for NJSpotlight.com, a public policy news coverage website focused on New Jersey government and industry; and for clients of StateBroadcastNews.com, a division of The Lubetkin Media Companies LLC. Steve has been the computer columnist for the Jewish Community Voice of Southern New Jersey, since 1996. Steve is co-author, with Toronto-based podcasting pioneer Donna Papacosta, of the book, The Business of Podcasting: How to Take Your Podcasting Passion from the Personal to the Professional. You can email Steve at [email protected].
