The office markets in North and Central New Jersey are showing early signs of a coronavirus-related slowdown, according to CBRE‘s Q1 2020 Marketview report.
The markets underperformance was seen in a variety of industry segments.
Leasing activity was 1.29 million square feet in the first quarter, a 98% uptick over last quarter’s low total, but down 17% year-over-year and 23% short of the five-year quarterly average. CBRE said leasing expansions as well as mergers and acquisitions slowed while renewals were stable. Average asking rents increased by $0.07 per-square-foot compared to the same period last year.
In the first quarter, there was little to no available space or COVID-19-related space dispositions. While construction continued through Q1, Gov. Phil Murphy ordered on Wednesday to halt all non-essential construction projects as of 8:00 p.m. Friday. CBRE predicted this will likely delay the delivery of projects currently under construction.
Net absorption was a negative 252,000 square feet, ending a three-quarter streak of positive figures. All of the negative absorption occurred in North Jersey, which registered a negative 427,000 square feet. Central New Jersey had a positive net absorption of 175,000 square feet.
The availability rate rose 18 basis points from last quarter to 19.58% or 352,500 square feet, the highest rate since Q2 2019. The market has been steady, but slow, since 2016.
The average asking lease rate for the office market ended the quarter at $26.91 per-square-foot, an increase of $0.38 per-square-foot from the previous quarter and a rise of $0.70 per-square-foot year-over-year. North Jersey’s asking rent recorded an average of $27.15 per-square-foot, while Central Jersey had a rate of $26.55.