Class A asking rents in the region which includes South Jersey hit an all-time high of $30 per-square-foot, according to CBRE’s first quarter 2019 office report.
The average asking rate jumped 3% quarter-over-quarter, CBRE said. Rents are lagging behind demand, it said, because landlords typically like to see demand grow before raising rents.
“Landlords typically prefer to see demand before increasing rents and last year was a record year for demand,” George Cauffman, executive vice president, CBRE, said. “As a result, landlords responded accordingly and asking rents spiked at the start of 2019. Enhancing this trend is the high level of investment activity in the office sector, with landlords expecting increased returns.”
In the first quarter, office vacancy rates in South Jersey also dipped slightly, due in part to tenants gaining more confidence in the market and thus, committing to more longer-term leases, according to Brian Saggiomo, first vice president based at CBRE’s Mount Laurel office.
“The southern New Jersey market right now is seeing brisk activity, driven by ‘eds and meds’ tenants, along with tenants in the insurance and financial services sectors, all of which are seeking space with accessibility to major highways, high visibility and prominent signage opportunities,” Saggiomo said.
In first quarter, overall net absorption for the region was down by 19,467 square feet from the previous quarter due to corporate downsizing, CBRE said.
“The decrease in occupancy did not come as a surprise, as large tenants continue to reduce their footprints or consolidate their employees within a single location,” Cauffman said.