Northern NJ Office Vacancies Hit Great Recession Level

Office vacancies in Northern and Central New Jersey are hitting levels last seen during the Great Recession that followed the global financial crisis.

The Q1 2023 office vacancy level for the northern half of the Garden state was 25.8%, just a couple of ticks lower than the 26% peak in 2009, according to a new report from JLL.

The Q1 vacancy level was an increase over the Q4 2022 level of 24.5%. The vacancy rate stood at 21% in 2019. The vacancy level in the Northern region actually exceeded the 2009 level at

“The first three months of 2023 were overshadowed by macroeconomic uncertainties, which provided headwinds to office demand,” the report said.

“Some companies are still looking to see what they want to do with their workspace going forward,” said Steven Jenco, director of New Jersey research at JLL. “Companies are still trying to feel out their return to office, how much space they’re going to need going forward.”

About 1.8 million square feet of space came onto the market in Northern NJ in Q1.

The largest lease signed in the first quarter was drugmaker Sanofi’s 260K deal at the M Stations West building in Morristown. The company will relocate its operations from Bridgewater in phases during late 2024 and early 2025, JLL said.

New Jersey’s office inventory in the Northern and Central regions totaled 168M SF in Q1 2023, according to JLL’s report, with 101M SF in the north and 67M in the central region.

Sanofi’s move from a suburban location along a highway to a downtown location next to a train station signaled the growing trend in NJ of suburban office complexes built in the last decades of the 20th century experiencing sizable vacancies, NJ.com reported.

Several Central Jersey municipalities—including Franklin, Bridgewater, Bernards and Warren—are seeing plans to demolish office buildings and replace them with warehouses, the report said,

The trend to build office space in Morristown near the NJ Transit train station mirrored Westfield’s recent approval of a redevelopment plan for 310K SF of office space in its downtown next to the train station and the vacant Lord & Taylor site.

Westfield officials cited as one of the main reasons for the redevelopment plan was to bring workers to the downtown area and increase foot traffic for downtown businesses.

M Station replaces a retail strip center on Morris Street between Lafayette Avenue and Spring Street. M Station’s two buildings will be bridged by a 1,000-car parking structure that will be constructed in two phases and include public parking for the development’s on-site retail.