Heading into the end of the year, leasing activity for North and Central Jersey’s office market is expected to remain steady, according to Cushman & Wakefield‘s latest market research findings.
The commercial real estate services firm found office leasing activity hit 2 million square feet in the third quarter, pushing year-to-date volume to 6.2 million square feet — 8.1% more than last year’s pace.
“Strong suburban tenant demand across the state countered some major blocks of space coming online as new vacancies,” Jason Price, Cushman & Wakefield’s director of Suburban Tri-State Research, said. “As a result, after hitting a recent vacancy low of 17.1% at mid-year, the rate ticked just slightly higher to 17.2%.”
Since mid-year, Price said some of the Central Jersey submarkets (Monmouth County, I-78 Corridor and the Upper 287 Corridor) have experienced vacancy increases. The region also lost 461,561 square feet of occupancy and its vacancy rate increased to 16.4%.
In comparison, in North Jersey, absorption totaled more than 507,000 square feet and the vacancy rate fell to 17.9%.
“Compared to one year ago, the state’s vacancy rate across all classes has improved steadily, and year-to-date net absorption now totals over 1 million square feet,” Price said. “This is well ahead of last year’s annual total.”
Five leases more than 50,000 square feet sparked demand in the third quarter, C&W found, with two leases topping 200,000 square feet. They include:
- Everest RE Group relocating to 313,000 square feet at the Warren Corporate Center in Warren Township;
- CIT Group relocating to 340 Mount Kemble Ave. in Morristown;
The two deals accounted for 24.8% of the state’s new deal volume in the third quarter.
“This marked the first time in three years that multiple new transactions of 200,000-plus square feet were inked in the same quarter,” Andrew Judd, New Jersey market leader, Cushman & Wakefield, said. “And yet, while the large deals grab the headlines, it’s been a steady churn of small deals that have pushed leasing in the Garden State. Since the start of 2019, users leasing less than 10,000 square feet have represented 34.5% of tenant demand across all asset classes.”
The state’s overall asking rental rate ticked slightly higher in the third quarter, although minimal, C&W said. The current square foot average ($29.68), which is being driven by an increase in Class A asking rents, represents an increase of 1.4% year-over-year. Quarter-over-quarter, North Jersey Class A rates went up $0.05 to $36.28 per-square-foot while Central Jersey’s rates declined by $0.02 to $29.30 per-square-foot.
“The trend of upgraded, amenitized office buildings achieving higher occupancies and stronger demand will continue as companies attempt to retain and lure new employees in the current strong job market,” Judd said. “This, combined with the expected positive state economic trending, is keeping landlords of Class A assets bullish – we may see them further raise asking rents in some cases.”