Cushman & Wakefield released its fourth-quarter 2022 office and industrial statistics for New Jersey on Friday, showing improved leasing activity in the office market and strong demand in the industrial market.
“2022 marked a year of improved leasing fundamentals, with new leasing velocity returning to levels we saw prepandemic in 2019,” Josh Cohen, managing director, stated. “Significant commitments from large corporate, life science and health care institutions bolstered activity, continuing an accelerated flight to quality trend. Encouraging momentum from year-end into 2023 is marked by firms of all industries and sizes reassessing footprints and reimagining the purpose and strategy of the office going forward. There is no doubt that this trend endures and we are watching its impact to net absorption and the ongoing need to repurpose obsolete office inventory.”
Leasing activity totaled 1.6 million square feet in the New Jersey office market during the fourth quarter, bringing the full-year volume to 8.3 million square feet, the highest leasing total since 2019, up 9.7% year-over-year. Class A leasing accounted for 69.6% of the total activity, up from the 54.2% recorded last year, as the flight to quality trend accelerated. The health care and life science industries remained active office occupiers. Despite strong demand, large blocks of vacant space continued to return to the market, stalling further improvement. The vacancy rate increased 70 basis points year-over-year, to 20.7%, as net absorption totaled negative 2.6 million square feet, with all but one county recording negative net absorption figures.
“Despite the current macroeconomic environment, strong demand for warehouse space in the port region persisted, as East Coast ports continue to gain market share amid unresolved labor negotiations at the West Coast ports,” Chuck Fern, executive vice chairman, stated. “A rebound in new leasing activity, together with a wave of new occupied completions improved net absorption this quarter. Although annual leasing activity and net absorption figured are down from a historic 2021, New Jersey’s industrial market ended 2022 strong and is heading into the new year with positive momentum.”
The Port of New York and New Jersey moved 723,069 20-foot equivalent units during November, outpacing both the ports of Los Angeles and Long Beach and solidifying New Jersey’s four-month streak as the busiest port in the U.S. Fourth-quarter net absorption in the New Jersey industrial market surpassed the 1 million-square-foot mark, after failing to do so in the previous two quarters. The average asking rent for warehouse space continued to improve, with the direct asking rent reaching a high of $15.59 per-square-foot, up 27.9% year-over-year. Quarterly new leasing activity for warehouse space reached 5.2 million square feet, bringing the year-to-date volume to 20.8 million square feet.
Q4 net absorption for warehouse space increased to 2.1 million square feet, leading to 5.4 million square feet of positive net absorption for the year. While absorption figures remain positive, a wave of new construction added additional space options for occupiers. In total, 12.2 million square feet of new industrial product were delivered in 2022, of which 52% was preleased. The vacancy rate for warehouse space closed out the year at 3% and remained relatively stable quarter-over-quarter. Sublease vacancies also increased during the fourth quarter, as the Top 5 newly available subleases added over 800,000 square feet of vacant space to the market. Despite these new additions, strong demand during the quarter offset any negative effects from the increase of new sublease space.