Second-Quarter Leasing Activity Reaches Highest Volume in Nearly Two Years
EAST RUTHERFORD, N.J., July 16, 2018 – Six office lease transactions larger than 100,000 square feet propelled the Northern and Central New Jersey office market during the second quarter, according to Cushman & Wakefield Research. And, looking ahead, healthy tenant demand will continue to drive fundamentals throughout the coming months.
“Large transactions have returned to the New Jersey office market, boosting new leasing activity to its best quarter in almost two years,” noted Cushman & Wakefield’s Andrew Judd, New Jersey market leader. “As a result, net absorption finished in the black, and vacancy ticked lower overall.”
The three largest second-quarter office lease deals involved Integra Life Sciences, which committed to 166,791 square feet at 1100 Campus Road in Princeton; JP Morgan Chase, which leased 148,000 square feet at 480 Washington Blvd, adding to its presence in Jersey City; and Mars Wrigley, which executed a 148,460-square-foot deal at 110 Edison Place in Newark.
In total, quarterly office leasing exceeded 2.5 million square feet, almost doubling the total accrued in the first quarter and bringing the 2018 year-to-date total to 3.8 million square feet (slightly ahead of last year’s pace). “Demand remained diverse throughout the state as usual, but life sciences, technology, insurance, manufacturing and finance led the way this quarter,” Judd noted. “Additionally, activity was spread throughout key submarkets, with Bergen County, the Hudson Waterfront, Princeton/Route 1, Woodbridge/Edison, Newark, and the I-78 Corridor all experiencing substantial leasing volume.”
The recent leasing surge helped push the state’s office vacancy rate lower by 20 basis points during the second quarter, to 18.4 percent, according to Cushman & Wakefield. The decline was more prominent in Central New Jersey, which experienced a 70 basis-point decrease, while vacancy in Northern New Jersey stayed relatively flat. Reflecting a reverse in recent trending, only two large blocks of space were returned to the marketplace in the past three months. Additionally, available sublet space dipped by 13.8 percent, marking the first time in more than a year in which sublease space did not rise.
Office asking rents continued to trend higher, with the overall average rental rate swelling by $0.51 during the second quarter, to $29.27 per square foot; in Northern New Jersey, rents have reached a historic high of $30.79 per square foot. Meanwhile, Class A average rents state-wide have climbed by 5.6 percent year-over-year to $33.54 per square foot – another historic high.
“With dwindling sublease space, landlords are increasingly confident in the current marketplace,” said Jason Price, director of Cushman & Wakefield’s tri-state suburbs research. “Sustained demand momentum and higher-priced Class A blocks on the market in prime areas are further contributing to the pricing uptick.”
This overall positive office trending is expected to continue in the coming months, with a handful of additional, significant transactions expected to close, according to Cushman & Wakefield. “Amenity-rich, upgraded assets will outperform the balance of the marketplace as companies attempt to attract and retain employees in the current tight labor market,” Price added.
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