Office Sector Makes Strides in New Jersey
- Nov 08, 2018
Despite the steady out-migration of businesses and residents to warmer and cheaper locales, and the long-term oversupply of inventory, New Jersey’s office market has remained resilient. Buoyed by the healthy economy, the metro added almost 100,000 jobs in the 12 months ending in May, and the unemployment rate hit a 10-year low of 4.4 percent in June. Two of the sectors that fuel the office real estate market—professional and business services and financial activities— led the way in job growth, adding a combined 23,800 office-using jobs in the metro between May 2017 and May 2018. The state government has helped to attract and retain companies such as Mars Wrigley Confectionery, Integra LifeSciences and Ralph Lauren by offering tax incentives through the Grow NJ Assistance Program.
New Jersey’s office vacancy rate has declined in recent years, but remained at 18.2 percent as of June. Development activity has been extremely tepid since 2013—when roughly 2 million square feet came online—and no major office project was completed last year. New construction either is a build-to-suit or has an environmental component. In some cases, office space is being redeveloped into housing or other uses.
More than 2.5 million square feet traded for $118.9 million in the second quarter, but sales volume has declined by 32 percent year-over-year. Suburban office has regained some luster with investors because of its higher yields, but deal flow remains weak.