New Jersey’s office market hit record levels this quarter, according to Transwestern Commercial Services‘ Second Quarter 2019 Office Market Report.
The report recorded its fifth consecutive quarter of positive net absorption, which has driven the state’s asking rent to a historical high of $27.22 per-square-foot. This is the first time the average asking rent has been above $27 per-square-foot. Vacancy rates have also improved, reaching a 10-year low, Transwestern found.
Multiple submarkets in the state experienced rent growth higher than 4% year-over-year, including Woodbridge/Metropark, Edison South, Parsippany Region, Hudson Waterfront, Wayne/Paterson and Somerset/Interstate 78 East. Of the state’s 21 total submarkets, 15 had higher rents year-over-year and also when compared to the previous quarter. Additionally, 13 of them are seeing occupancy levels higher than the state average.
“Continued demand for high-quality office space is supporting both successful repositioning of existing assets within prime locales and this cycle’s first speculative ground-up office development. These factors are putting upward pressure on overall market rents,” Matthew McDonough, TCS managing director, said. “The steady success of the New Jersey commercial real estate market is encouraging investors to move forward with new development plans throughout the state, in both urban and suburban areas.”
TCS said there are several major commercial real estate projects currently underway that are strongly performing in both urban and suburban submarkets. They include: the groundbreaking of Toll Brothers’ 1000 Maxwell Lane in Hoboken; 350,000 square feet of office space in Morristown by SJP Properties and Scotto Properties; and 100,000 square feet of office space above existing retail properties in Morristown by the Silverman Group.
There are also several large leases signed in the suburbs by life science companies, including IQVIA’s sublease of 115,000 square feet in the Somerset/I-78 East submarket and Genmab U.S. Inc. for 90,000 square feet in the Princeton submarket. Other top industries leasing in the suburbs include law firms, professional service firms and health care companies. Government tenants were particularly active in Newark.
“The U.S. economy reached the longest expansion in U.S. history and at the same time, we’re seeing some remarkable trends and growth in the office sector,” Matthew Dolly, New Jersey research director at TCS, said. “However, the Grow New Jersey tax credit program expired with no replacement and remained under scrutiny, which may pose some challenges to attracting and retaining businesses. The minimum wage increase could also impact hiring and potentially decelerate overall growth.”