The good news on the office market in New Jersey: There are some positive signs, including an all-time high in average asking rents.
The wait-and-see news: Most occupiers are continuing to take a cautious, wait-and-see approach to their real estate requirements.
This analysis is courtesy of CBRE’s Q3 2020 office report.
Overall leasing activity of 1.25 million square feet was a 256% increase from the second quarter, but still well below the quarterly long-term average, CBRE said.
However, despite this improvement, the statewide availability rate during the third quarter was up to 20.8%, 50 basis points greater than the previous quarter and 130 basis points greater year-over-year. Additionally, net absorption during Q3 2020 was negative 648,975 square feet, mostly due to companies putting more sublease space on the market to cut major expenses as uncertainty over the pandemic and economic recovery continues.
Then there’s this: The influx of new space hitting the market, however, did not affect the market’s average asking rents, according to CBRE. In fact, the average asking rent edged up slightly, by nearly 1% to $27.28 per square foot, an all-time high.
Senior Vice President Remy deVarenne put it this way:
“While New Jersey’s office market showed some signs of improvement during the third quarter, looking ahead, we see more and more space coming on the market and occupiers downsizing,” he said. “We anticipate companies allowing more work from home flexibility for the foreseeable future.”
During the third quarter, three new commitments of 100,000 square feet or more — including two in Jersey City — led the overall activity. The market also benefited from a handful of large, long-term renewals. Among the largest transactions completed during the quarter were a 306,471-square-foot new lease by Eisai Corp. in Nutley and a 227,853-square-foot commitment by American International Group in Jersey City.
On the investment sales side, New Jersey had several major transactions finalized during the quarter.
Among the most noteworthy was the sale of a 10-property, 1.45 million-square-foot portfolio in Parsippany and Madison sold by Mack-Cali Realty Corp. to a group of investors including Onyx Equities, Taconic Capital Advisors, Axonic Capital and Machine Investment Group for $160 million, or $110 per square foot. The quarter’s largest office transaction on a per-square foot basis was AIG’s sale to Opal Holdings of 194 Wood Ave. S. in Iselin for $140 million, or $297 per square foot.
To download the full report, click here.