New Jersey has transformed into a market categorized by small office deals, according to CBRE Research.
The total number of leases in the Garden State, CBRE said, has increased year-over-year in 2016 and 2017, however, in 2017, the number of large-sized deals (more than 50,000 square feet) hit a five-year low.
CBRE said it predicts by the end of this year, the number of big leases will have declined even further.
The total amount of small deals (below 10,000 square feet) has been growing strongly since 2013, CBRE said. At the end of the third quarter of 2018, the total number of new small leases hit 581, which surpassed 2017’s year-end total.
CBRE said small deals take up about three quarters (76.9 percent) of all leases signed and its market share has been growing since 2015. The amount of market share large leases take up has declined from 14.7 percent in 2013 to a 6.6 percent through the first three quarters of this year.
The impact of small deals can also be seen in the decline of average transaction sizes, CBRE said.
The average size lease in the first three quarters of 2018 was 11,950 square feet, a 37.5 percent drop from 2015’s high-point average of 19,117 square feet.
CBRE said New Jersey’s office fundamentals have been stable.
The availability rate over the past five years has steadily sat between 20.5 percent and 21.8 percent. Rent growth hit 9.7 percent this quarter — which is less than half of the 20.7 percent growth rate for the U.S. overall.
The downward trajectory of large deals has led to a decrease in total leasing activity in recent years, CBRE said.
“The combined impact of too many large blocks and not enough large-block demand suggests that the market is likely to see the current availability and rent levels persist,” Remy P. de Varenna Jr., senior vice president, CBRE, said. “Changing the trajectory of the market will require reducing the oversupply of space and realigning available inventory to better meet he demands of current and future tenants in the market.”
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