Although Cushman & Wakefield’s third quarter commercial real estate report showed that the markets remained flat on a statewide basis, there were some bright spots, including rising Class A asking rental rates in the central New Jersey region.
Financial services commitments accounted for 24.0 percent of the state’s 2.1 million square feet in office leasing volume during the past three months, according to Cushman & Wakefield report. Pharmaceutical, healthcare and technology sectors accounted for almost 20 percent of the leasing volume.
“In Central New Jersey, office leasing activity totaled just over 650,000 square feet during the third quarter, down slightly from the volume recorded during the second quarter,” said Cushman & Wakefield’s Kim Brennan, New Jersey market leader. “The year-to-date total of 2.3 million square feet is 19.8 percent, lower than the total at this time in 2013.”
Princeton/Route 1, however, also recorded a quarter-over-quarter rise in deal volume. TRAC International’s 80,000-square-foot commitment at 750 College Road East in Princeton represented Central New Jersey’s largest third quarter office lease.
The I-78 Corridor also experienced an up-tick in activity with more than 250,000 square feet of office transactions inked, accounting for 38.4 percent of the central New Jersey third quarter leasing total (652,520 square feet). The largest deal in that submarket involved United Healthcare’s 56,000-square-foot lease at 131 Morristown Road in Basking Ridge.
“Corporate dispositions outpaced leasing in central New Jersey, and the vacancy edged higher by 0.7 percent during the third quarter to rest at 18.3 percent,” Brennan reported. “Many market segments were marred by mid-sized space additions, ranging from 25,000 to 75,000 square feet, which exacerbated the impact of slower demand.”
While average rents are up 0.6 percent from last year at this time, they trended slightly downward quarter over quarter. The northern New Jersey average Class A asking rental rate fell by $0.41 per square foot to $29.79, mainly due to high priced space leasing up in the Waterfront. The central portion of the state experienced the opposite trend, climbing $0.36 per square foot to $28.76 per square foot, as higher-priced space came online in Princeton and the I-78 Corridor.
“Looking ahead, we anticipate a continuation in New Jersey’s lackluster office market performance through the remaining few months of 2014,” Brennan noted. “That said, there are promising signs for increased momentum in 2015. A number of notable deals in the pipeline should bolster leasing volume. Additionally, state incentives continue to drive interest in New Jersey among major space users looking to expand or establish a presence here.”