The Northern and Central New Jersey office market registered a decline in leasing activity of nearly 50.0 percent compared with deal volume recorded one year ago, according to JLL. The state saw only 1.4million square feet in completed deals during the third quarter of 2017, compared with 4.1 million square feetposted in the same quarter one year ago.
“Since the beginning of the year, much of the demand for Northern and Central New Jersey office space has been fueled by smaller leases, rather than the 100,000-square-foot and larger transactions needed to move the needle for the office vacancy rate,” said Stephen Jenco, vice president and director of suburban tri-state research. “Just 5.0 percent of the leases completed so far this year were larger than 100,000 square feet, compared with 15.0 percent of transactions during the same periodlast year.”
Against this backdrop, the Northern and Central New Jersey overall office vacancy rate ticked down to 24.5 percent compared to 24.6 percent at mid-year. Yet, the vacancy rate remained above the 24.0 percent level seen one year ago.
The Northern and Central New Jersey Class A office market was also kept in check by additional sublease space added to the inventory in the third quarter of 2017.Approximately 4.9 million square feet of Class A space was available for sublease, compared with 4.4 million square feet marketed in mid-2017. Despite this uptick, sublease space accounted for less than 20.0 percent of total available Class A space. This was in contrast to a high-water mark of 40.0 percent of available space the state witnessed in 2002.
More than 20.0 percent of the sublease space was concentrated in the Parsippany Class A office market.The largest block added during the third quarter was the 173,150 square feet put up for sublease by The Medicines Co.at 8 Sylvan Way in Parsippany.
Approximately 501,260 square feet of office space was in various phases of development during the third quarter. The largest project underway consists of a former warehouse being redeveloped into 456,000 square feet of modern loft-style office space at 110 Edison Place in Newark.
Highlights of the third quarter of 2017 include:
- The Northern and Central New Jersey Class A average asking rental rate for direct space increased less than 1.0 percent from the previous quarter to $29.79 per square foot, as new availabilities with higher asking rents continued to boost the average Class A rental rate. Year over year, the state’s Class A rental rate for direct space rose 6.2 percent from $28.04 per square foot.
- With an average asking rental rate of $43.05 per square foot in the second quarter, the Hudson Waterfront continued to maintain the highest Class A rent in the office market. Metropark’s asking rental rate of $35.01 per square foot represented the highest Class A rent in Central New Jersey. Class A rents for both submarkets remained unchanged from the previous quarter.
- After a mere 18,560 square feet was absorbed in the Princeton Class A market during the second quarter of 2017, a rebound in leasing momentum produced more than 172,000 square feet of positive net absorption three months later. The Princeton Class A vacancy rate subsequently slipped below 26.0 percent after eclipsing at 27.0 percent earlier this year. Contributing to the lower Class A vacancy rate was Billtrust.com’s leasing of 88,760 square feet at 1009 Lenox Drive in Lawrenceville. The billing services software company was awarded a 10-year, $12.9 million Grow NJtax credit to relocate its headquarters from Hamilton to Lawrenceville, where it plans to add 200 new jobs. In addition, S&P Global Inc. absorbed 75,000 square feet at 1 Independence Way.
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JLL is a leader in the northern/central New Jersey commercial real estate market, with more than 1,000 professionals and support staff providing agency leasing and property marketing, tenant representation, industrial services, strategic consulting, occupancy planning, workplace strategies, project and development services, property and facility management, and investment sales/capital markets services to New Jersey's leading corporate tenants, investors and landlords. The firm, which assists clients from three full-service offices in Parsippany, Iselin (Metropark) and East Rutherford, also acts as a local service provider for JLL’s global and national corporate clients in need of real estate assistance in New Jersey. JLL’s New Jersey operations were honored by NJBiz magazine as one of its 2015 Best Places to Work in New Jersey.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $145 billion. At the end of the second quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of nearly 80,000. As of June 30, 2017, LaSalle Investment Management had $57.6 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit ir.jll.com.