CBRE, a Dallas-based global commercial real estate services and investment firm, reported that office-leasing activity fell in the first quarter in the northern and central New Jersey markets.
After rising for two consecutive quarters, office-leasing activity dropped 26% to 1.10 million square feet quarter over quarter and is off 9% from the five-year quarterly average as asset defaults and financial instability took a toll on the real estate market. There was only one lease larger than 100,000 square feet during this period. Quarterly net absorption was negative 192,000 square feet in the first quarter.
Leasing activity in the first quarter in northern New Jersey tumbled 45% to 636,000 square feet from 1.16 million in the previous quarter. In contrast, central New Jersey leasing activity climbed 43% to 462,000 square feet from 323,000. The Route 287/78 Interchange submarket led the region with 214,000 square feet of leasing activity. The area was buoyed by the 175,000-square-foot lease from MetLife at 400 Warren Corporate Center in Warren, the biggest lease for the New Jersey market.
CBRE cited high vacancy rates, uncertain demand, and increased borrowing costs impacting the market. In the first quarter, Class A leasing shrank to 78% of all leasing activity from 88% in the prior quarter.
In other real estate news, renewals rose 38% to 618,000 square feet quarter over quarter. Sublease availability slipped 20 basis points quarter-over-quarter to 4.2%, which equates to 6.36 million square feet of sublease space. Average asking rent was $31.74 per square feet, an increase of 1% quarter-over-quarter.
CBRE said prime assets continue to outperform the overall market. Prime properties accounted for 17% of first-quarter leasing activity while representing 9% of the market. The availability of these assets declined 500 basis points to 19.5%, as tenants sought amenities, strong locations, and higher quality workspace environments. Asking rents for prime assets are $41.41 per square foot, a 30% premium to the overall market.
