A report by commercial brokerage Cassidy Turley says office space rents are going up in central New Jersey despite overall “negative absorption” of office space in the third quarter due to companies leaving the Woodbridge/Edison submarket. The report said Princeton enjoyed “strong leasing activity.”
The report reached similar conclusions as a Cushman & Wakefield analysis showing increasing rents in Central New Jersey despite a flat market statewide (U.S. 1, October 15).
The declining unemployment rate, Grow NJ incentive program, and continued repositioning of assets are driving forces behind improving underlying market conditions. New Jersey’s unemployment rate dropped 140 basis points to 6.3 percent, slightly above the national unemployment rate of 6.1 percent, the report said.
Although Central New Jersey reported negative absorption at 39,353 square feet in the third quarter, it was a strong improvement over the previous quarter, when absorption was at negative 560,504 square feet. The negative absorption can partially be attributed to several mid-size companies vacating the Woodbridge/Edison submarket, causing an 80 basis point increase in availability to 21.1 percent. Despite that jump, there were several positive indicators, including an overall dip in availability to 22.8 percent as well as a rise in asking rents to $24.93 per square foot, largely due to strong leasing activity in the Brunswick/Piscataway/I-287 and Princeton submarkets. Availability in Princeton sunk 20 basis points to 16.8 percent, and absorption in the Brunswick/Piscataway submarket rose to 50,380 positive square feet.
“Even with the negative absorption in both the Northern and Central NJ office markets, asking rents continue to increase, and several submarkets within each region are experiencing robust activity,” said Raymond Trevisan, Cassidy Turley managing principal in New Jersey. “Those factors combined with continuing job growth lead us to believe New Jersey will experience further growth in the remainder of 2014.”
Availability increased by 20 basis points to 24.5 percent in the Northern NJ office market, generating 86,083 square feet of negative absorption in the third quarter after positive absorption in back-to-back quarters. The dip is primarily a result of negative absorption in the Newark and North Bergen submarkets.
The Hudson Waterfront and Morristown submarkets were bright spots in the Northern NJ office market in the third quarter. Already boasting one of the lowest availability rates, Hudson Waterfront availability dropped to 13.4 percent as a result of several large transactions spurred by the Grow NJ incentive program. In the Morristown submarket, robust leasing activity had a positive impact on absorption, which remained positive in the third quarter.
The same company’s report on industrial space found not such a rosy picture.
Central New Jersey slowed slightly with 65,535 square feet of negative absorption, as vacancy jumped 80 basis points to 7.3 percent due to several large spaces becoming available. Asking rents declined marginally from $5.40 per square foot to $5.35 quarter over quarter. Several move-outs and downsizing in the Exit 12 and Exit 8A submarkets were contributing factors to the downturn during the third quarter. Exit 12 vacancy rose to 16.4 percent, and Exit 8A experienced a 30 basis point increase. Alternatively, the Exit 9 submarket performed exceptionally well with 564,828 positive square feet of absorption posted in the third quarter. Despite the recent downward trend, vacancy was still 20 basis points lower in Central NJ than it was a year ago, and with the exception of the second quarter, asking rents are the highest they have been since the end of 2009.
“Despite the sluggish activity in Central New Jersey, the industrial market has played a strong role in the recovering state economy,” said Laurence Casey, senior vice president of Cassidy Turley. “As employment increases over the next few years, we can expect to see a growing demand for industrial space and users seeking to take advantage of favorable market conditions.”