Cushman & Wakefield released its first quarter 2019 New Jersey market research findings on Wednesday, and it showed a strong start to the year.
The office sector, the commercial real estate services firm said, has strengthened across all major fundamentals, highlighted by a low vacancy rate — the lowest in 12 years.
The industrial sector has also strengthened in leasing, new developments and pricing, the firm said.
In the first quarter, New Jersey had 343,000 square feet of office space net absorption. This figure pushed total absorption over the past year to more than 2 million square feet.
Office vacancy for the year hit 17.3%, a 30-point dip since year-end 2018.
On the submarket level, there were big drops in the first quarter in Morristown (-370 basis points), the Meadowlands (-280 basis points), the I-78 Corridor (-80 basis points) and Monmouth County (-70 basis points).
“While small business leasing has been the constant and steady force for the New Jersey office market in recent years, mid-sized deals (20,000 to 60,000 square feet) drove 30% of new deal activity in the first quarter,” Andrew Judd, Cushman & Wakefield’s New Jersey market leader, said. “Deal volume thus far in 2019 has been diverse, with the life sciences, legal services, retail/wholesale and manufacturing industries leading the way.”
Asking rents in the first quarter were steady, the firm said, even with Class A office availability being down slightly throughout the state. At $29.42 per-square-foot, New Jersey’s asking rent is up 2.3% year-over-year.
“With the backdrop of steady national and local economies, the New Jersey office market should remain stable in the coming months,” Judd noted. “While some dispositions are anticipated as tenants play musical chairs within the state, pending mid-sized and large transactions in the pipeline should balance things out. As has been the case, office buildings that are modernized with amenities will continue to draw the most success with mid-sized and large corporations as they attempt to attract talent and retain their current workforce in this tight labor market.”
In the first quarter, industrial leasing, which totaled 7.6 million square feet, represented a 19.4% year-over-year increase. E-commerce and 3PL tenants led the market, the firm said, representing four out of the six industrial deals in that were over 200,000 square feet.
“Existing Class A industrial opportunities remain scarce, and many tenants are opting for new development,” Jason Price, Cushman & Wakefield’s tri-state suburbs research director, said. “In fact, proposed and under construction warehouse sites accounted for 43 percent of the first-quarter leasing total.”
There were seven industrial buildings delivered to the market in 2019. They totaled more than 2.5 million square feet.
At the end of the first quarter, the state’s industrial vacancy rate was 3.5%, slightly up, the firm said, due to the completion of new spec projects.
“This uptick is expected to be brief as tenant interest for these primary Class A spaces remains healthy,” Price said. “In fact, we project occupancy and utilization to remain at historically high levels as demand for Class A product remains strong in the core submarkets along the New Jersey Turnpike.”
Industrial rent also grew in the quarter, up to $8.78 per-square-foot, a 6.9% increase year-over-year.
“As eCommerce sales growth persists, the industrial market should stay on its current trajectory in the near term,” Price said. “Despite debates about late cycle stage, and concerns about global growth slowdowns, the desire for same-day and next-day delivery in infill markets like New Jersey continue to drive strong demand.”