NJ Office Rents Peak at Highest Average on Record
Property upgrades and redevelopments bolstered average asking rents to new highs.
FLORHAM PARK, NJ—Office redevelopment throughout New Jersey has pushed the state’s average asking rent to a new high of $26.94 per square foot, according to Transwestern’s Fourth-Quarter 2018 Office Market Report. In 2018—the sixth consecutive year in which the market experienced positive absorption—rents increased by 2.3 percent. During the past five years, rents have risen by 11.2 percent.
“Opportunity Zones will play a major role in the revival of the office market on a national level, and New Jersey ranks among the top areas in the U.S. for development potential in these areas,” said Matthew McDonough, Transwestern’s managing director. “Newark’s Amazon HQ2 bid proved to be a useful exercise that prepared the state to showcase its incredible talent, higher education and vast infrastructure.”
Year over year, 15 of the 21 submarkets examined by Transwestern experienced positive absorption. With 13 of the 21 submarkets experiencing positive absorption during the fourth quarter, the state’s vacancy rate continues to improve gradually, closing at 14.8 percent for the quarter.
“With antiquated office properties being redeveloped or demolished, we’re seeing rents rise and continued positive absorption,” says Matthew Dolly, Transwestern’s New Jersey research director. “Furthermore, several tenants that signed large leases late in 2018 will take possession in 2019, which will only help improve occupancy levels.”
Large transactions consisting of renewals, expansions and relocations contributed to the positive trends in the market. TD Ameritrade’s relocation within the Hudson Waterfront submarket to 70 Hudson St. in Jersey City was the largest lease of the quarter. Sumitomo Mitsui Banking Corp. and First Data expanded their footprints in Jersey City, while a multitude of new, mid-sized leases throughout the region helped balance the market.
The most active submarkets in Northern New Jersey included Newark, Bergen North, Meadowlands, Hudson Waterfront and Morristown Region, while Somerset/Interstate 78 East, Princeton Area, Route 287 South and Monmouth East led the pack in Central New Jersey.