James Postell, partner and city leader, left, and Matthew Dolly, New Jersey research director, Transwestern (Photo composite)
FLORHAM PARK, NJ—As the slow but steady resurgence of the New Jersey office market continues, vacancy has reached its lowest level in nearly a decade. After decreasing by one-tenth of a percentage point for the third straight quarter, the vacancy rate is currently 14.7%, according to Transwestern Commercial Services' First-Quarter 2019 Office Market Report.
Vacancy was buoyed during the first quarter of the year by strong absorption: 12 of the state's 21 submarkets reported positive absorption, marking the fourth consecutive quarter in which the state recorded positive net absorption as a whole — a feat that hadn't been achieved since 2014.
Although approximately 75% of leases signed throughout the state were for less than 25,000 square feet, with business service companies driving the bulk of leasing activity, nearly half of the 21 submarkets recorded more than 100,000 square feet of leasing. Biotechnology company Celularity's 147,215-square-foot lease at 170 Park Ave. in Florham Park represented the quarter's largest lease, and the only one exceeding 100,000 square feet.
“Due to high prices in walkable downtowns, millennials are expanding their geographical parameters for living preferences to areas just outside downtowns, which can only help suburban business, and consequently, the suburban office market,” says Jim Postell, TCS partner and city leader. “The Celularity lease, where we're proud to have been the leasing agent for property ownership, is the latest example of a suburban office building gaining successful lease-up following substantial capital improvements.”
Despite receding slightly during the first quarter, asking rents are still trending upward in New Jersey. Year-over-year rents have increased by 2%, and they are up 8.9% over the past five years. Furthermore, the current average of $26.86 per square foot is the fourth-highest on record for the state. Year-over-year rents in five submarkets — Bergen East, Edison South, Meadowlands, Parsippany Region, and Wayne/Paterson — have increased by more than 5% each.
“Rents are increasing in buildings that are being upgraded, in part due to increased demand, but also because owners need to recover higher construction costs,” says Matthew Dolly, TCS New Jersey research director. “Simultaneously, with the business sector prospering, tenants are increasingly competing to attract the best talent by seeking the most desirable workplace amenities: connectivity and convenience.”
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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].
