NJ Finishes 2015 with Strong Office Leasing
- Jan 06, 2016
Bolstered by a strong fourth quarter, office leasing in New Jersey hit its highest annual total in a decade, with 10.9 million square feet of gross absorption, according to Cushman & Wakefield.
Fourth-quarter office leasing surpassed 2.1 million square feet, highlighted by six leases of more than 50,000 square feet each, including a 205,000-square-foot commitment by the New Jersey Turnpike Authority at 1 Hess Plaza in Woodbridge and a 170,000-square-foot lease by Lowenstein Sandler at 56 Livingston Ave. in Roseland. Tenants in the other sizable fourth-quarter leases were BMW, Bank of America, WeWork and NICE Systems, helping to drive almost 245,000 square feet of net absorption.
“Overall net absorption finished in the green for the fourth consecutive quarter, with occupancy gains reaching just under 2.0 million square feet for the year, well above the 2014 total of 300,000 square feet,” Andrew Judd, Cushman & Wakefield’s New Jersey market leader, said in a prepared statement. “Additionally, office vacancy fell by 1.4 percentage points since a year ago to 18.7 percent, its lowest point since 2011.”
“Activity here remains diverse in terms of industry type this quarter, with computer, legal and financial services accounting for much of the recorded deal volume,” added Cushman & Wakefield’s Jason Price, research director, tristate suburbs. “Approximately 73 percent of office leasing volume during the final three months of 2015 was concentrated in Class A space, as tenants continued their search for high-quality, modern space.”
The Hudson Waterfront held the top spot, at just over 300,000 square feet of new leasing recorded, and Woodbridge/Edison, Princeton/Rte. 1 and the I-280 Corridor all exceeded 200,000 square feet in quarterly new demand, according to C&W.
“The market itself, as far as vacancy goes, is comparable to 2010 in terms of numbers, but that market was going in the opposite direction, with the recession in full swing,” Price told Commercial Property Executive. “Much of New Jersey’s gains are not coming at the expense of New York City, although some larger deals in the Hudson Waterfront could be considered ‘New York’s loss, New Jersey’s gain,’ whether it was a tenant leaving NYC or opting to remain in New Jersey and not cross the river.”
With quality space tightening and demand remaining strong, Class A rents in Northern New Jersey rose by 2.1 percent in 2015, while Class B rents climbed 2.2, Price said in the prepared statement. Though Price expects tenant demand for New Jersey office product to remain healthy this year, he cautioned that space coming online may slow the pace of the market’s improvement.
Judd noted that the completion of the Bell Works campus in Holmdel will put more than 800,000 square feet of Class A space on the market and Bristol-Myers Squibb’s pending relocation to its new BTS headquarters in Lawrenceville will leave 650,000 square feet in Plainsboro empty late this year.
But despite these and a few other anticipated vacancies, he predicts, “New Jersey is poised to see occupancy gains during much of 2016. This should, in turn, maintain the current upward pressure on rents in the state’s major submarkets.”