The New Jersey office real estate market in the first quarter continued to show signs of stabilization, according to a report from Avison Young, while the industrial sector is facing challenges.
Asking rents stayed in the mid-to-high $32-range and availability continued to fall through the first quarter. Avison Young said tenants are seeking high-quality, amenity-rich environments that have undergone capital improvements and have financially secure owners and landlords. This trend is especially prevalent in transit hub markets such as Morristown, Summit and urban markets such as Newark and Jersey City.
Overall availability, consisting of direct and sublease space, declined by 70,000 square feet from the previous quarter. First-quarter leasing volume, consisting of all leasing activity, totaled 2.1 million square feet, a 31.44% decrease from the same time of a year ago. Pre-pandemic first-quarter average leasing volume was 3.3 million square feet (2015-2019).
Things appear to be more challenging in the industrial sector.
Avison Young reported that average asking rent has declined 1.62% since the start of 2025. Uncertainty regarding tariff negotiations between the United States and other nations has sidelined activity. Avison Young believes average asking rents will continue to decline and then stabilize through the end of 2025 and into early 2026.
Leasing volume was down 38.9% totaling 4.91 million square feet, the lowest leasing activity amount in the first quarter of a year since 2019. Avison Young said economic factors such as inflation, wage increases, and higher interest rates continue to impact tenant commitments.
A reassuring data point was the vacancy rate, which held steady at 7.8% quarter over-quarter. The vacancy rate had risen every quarter since the fourth period of 2022. New construction starts have slowed to the lowest amount since 2008. This allowed demand to catch up to the influx of supply seen throughout 2023 and 2024.
