JLL has taken an in depth look at New Jersey’s transit hub markets, releasing its Mid-Year 2019 NJ Transit Hub Perspective report on Friday.
New Jersey’s transit hubs are defined by JLL as office properties adjacent to, or within walking distance of, a New Jersey Transit commuter rail station.
Here are some of the findings:
Since 2017, North and Central Jersey’s office market has experienced a decrease in leasing volume. Despite that, the overall vacancy rate in the state’s transit hub submarkets slipped lower by 50 basis points during the first half of 2019 to 24% as tenants leased space in buildings near mass transportation.
Contributing to the lower overall transit hub vacancy rate was 790,680 square feet of positive net absorption, JLL said. Most of the absorption was concentrated in the urban transit hub market, where the vacancy rate declined from more than 20% in 2018 to 19.4% in mid-2019.
Newark also had a hand in the lower overall transit hub vacany rate, where 110 Edison Place, known as Ironside Newark, was finished and added to the office inventory base. Mars Wrigley also occupied 402,530 square feet for its new U.S. headquarters. Among the biggest completed in Newark’s submarket was General Services Administration leasing 76,290 square feet at 3 Gateway Center.
In contrast to the vacancy rates, a discrepancy in asking rents continued to widen by mid-2019. The overall suburban asking rental rate increased $0.09 during the first six months of 2019 to $25.50 per-square-foot, while the overall transit hub rental rate went up by $0.12 to $34.53 per-square-foot. The $9 difference in rents between the suburban and transit hub markets was the largest in nearly a decade.
Class A office buildings near NJ Transit stations remained top of mind for tenants with space requirements. More than 95% of leases completed in the first half of 2019 included Class A assets. The transit hub market Class A vacancy rate declined from 19.9% in 2018 to 18.3%. In comparison, the state’s suburban office market’s Class A vacancy rate was above 26% in mid-2019.
The Hoboken/Jersey City average asking Class A rent of $45.60 per-square-foot is the highest rental rate among all the transit hub markets in New Jersey. Newark comes in as a second alternative for companies looking for urban spaces near New York City with a rental rate of approximately $34.50.
The only new construction currently underway in the state’s transit hub market is a 100,700 square foot mixed-use project at 1000 Maxwell Lane in Hoboken. There are limited modern spaces available, which puts pressure on Class A rental rates.
Looking ahead, the state’s transit hubs are expected to remain active office suppliers that are within close access to mass transit options for their employees.