Cassidy Turley Reports ‘Flight to Quality’ Trend is Prevalent in the New Jersey Office Market
“The ‘Flight to Quality’ trend that we have seen for a number of years continues to occur throughout the New Jersey office market, as tenants take advantage of favorable market conditions and upgrade to higher quality and better located properties” stated David A. Simon, SIOR, Managing Principal, New Jersey for Cassidy Turley. “This trend forces owners of older generation buildings to make improvements and increase amenities in order to retain existing tenants and attract new ones”, stated Simon. According to the third quarter Office Market Report published by Cassidy Turley, a leading commercial real estate services provider in the U.S., there was positive absorption in the class A office market in New Jersey totaling 336,482 square feet while the class B office market recorded negative net absorption of 261,964 square feet.
Central New Jersey is experiencing positive demand in contrast to Northern New Jersey. Cassidy Turley’s Market Report noted increasing momentum in the Central New Jersey office market, with 413,926 square feet of positive absorption. The vacancy rate decreased to 16.4 percent from 16.8 percent in the previous quarter, which is the first drop in six quarters. Class A space accounts for 88 percent of this positive demand and the Princeton area submarket continues to lead market activity in Central New Jersey. Life sciences companies are a prominent driver of demand in the area, however data centers continue to gain demand and will be a focal point in the market. The average asking rental rate in Central New Jersey dropped by eleven ($0.11) cents from the last quarter to $23.35 per square foot.
Marking two consecutive quarters of decreasing demand and historically high vacancy rates, the Northern New Jersey office market ended the third quarter with a vacancy rate of 14.5 percent, slightly increasing from 14.3 percent in the second quarter. However, the Hudson Waterfront submarket continues to lead office market activity with 120,344 square feet of positive absorption in the third quarter and the lowest vacancy rate in Northern New Jersey.
There was 339,408 square feet of negative absorption in Northern New Jersey, with Class B space accounting for 92 percent of the negative absorption. The average asking rental rate fell by eleven ($0.11) cents from the second quarter to $24.83 per square foot.
Notable transactions include:
- The announcement from Danish pharmaceutical company Novo Nordisk Inc., and a joint venture of Ivy Equities, LCOR and Intercontinental Real Estate Corporation, of a $215-million project to redevelop a 770,000-square-foot building located at 800 Scuddders Mill Road in the Princeton-area submarket stands as the largest office transaction in New Jersey year to date.
- Church & Dwight announced that the company will build two 125,000-square-foot buildings in Ewing for its new headquarters.
- In Northern New Jersey, Hartz Mountain Industries sold the 324,912-square-foot 2 Journal Square in Jersey City to a joint venture between Phoenix Insurance and Menora Mivtachim for $78 million or $240 per square foot.
About Cassidy Turley
Cassidy Turley is a leading commercial real estate services provider with more than 3,400 professionals in more than 60 offices nationwide. The company represents a wide range of clients—from small businesses to Fortune 500 companies, from local non-profits to major institutions. The firm completed transactions valued at $18 billion in 2010, manages 455 million square feet on behalf of private, institutional and corporate clients and supports more than 25,000 domestic corporate services locations. Cassidy Turley serves owners, investors and occupiers with a full spectrum of integrated commercial real estate services—including capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. In 2010, the firm enhanced its global service delivery outside of North America through its partnership with GVA. Please visit www.cassidyturley.comfor more information about Cassidy Turley.