Colliers International New Jersey 3Q Office Market Report for Northern and Central NJ
CORPORATE TENANTS, REDEVELOPMENT POINT TO SIGNS OF OPTIMISM FOR NJ OFFICE MARKET
--Tax incentives, flexible rent, early lease renewals
buoy flat fundamentals--
NEW JERSEY, October 19, 2012 – While overall property market performance has been flat in the Northern and Central New Jersey office markets for several quarters running, a number of large companies have taken advantage of local tax incentives and reduced rents to make long-term commitments within the state, according to the Third Quarter Northern and Central New Jersey office leasing market report from Colliers International New Jersey. There were no major changes in the average asking rents during the quarter, and it is anticipated that no major changes to the overall market fundamentals will occur until at least 2013.
The overall average asking rent in Northern and Central New Jersey for the third quarter was $22.00/sf, essentially unchanged from $22.03/sf the previous quarter and down slightly from $22.29/sf a year ago. Locally-based companies are using these market conditions to their advantage with landlords, who are offering generous lease terms and concessions to finalize transactions. State tax incentives such as the Grow New Jersey Assistance Program are also helping reduce net occupancy expenses, incentivizing companies to remain in the area.
“Assuming that asking rents and the need for office space both hold steady — and there are indications that will be the case — we should see some net absorption of space next year,” said Matt Dolly, head of research for Colliers International New Jersey. “It’s going to take the continued investment by the larger companies, staying in the area and growing their businesses to lay the groundwork.”
Dolly pointed to the PSEG lease renewal, which was arranged by Colliers International New Jersey and is one of the largest real estate transactions in state history. PSEG leased 825,000 square feet through an early renewal — at reduced rates — to remain at 80 Park Plaza in Newark through at least 2030. To further incentivize PSEG, landlord Wells Real Estate Investment Trust II will invest $15 million of capital in the property, upgrading it with new operating efficiency equipment and programs.
Property owners are also turning to redevelopment projects for the first time in four years, with very positive results. Fortune 100 firm Honeywell recently announced its commitment to remain in Morris Country after being offered a $40 million tax incentive through the Grow New Jersey program to redevelop its outdated and inefficient 147-acre campus.
MeanwhileBayer Healthcare committed to New Jersey earlier in the year by purchasing the former Alcatel-Lucent site in Whippany, with plans to relocate its U.S headquarters to that location. In Holmdel, Somerset Development and the municipality are taking steps to redevelop Alcatel-Lucent’s 472-acre site.
Other figures from the third quarter 2012 include:
Northern New Jersey
- Following consecutive quarters of positive net absorption, large blocks of space returned to landlords in the third quarter, resulting in an increase in availability to 21.0 percent, up from 20.3 percent the previous quarter.
- BASF took occupancy of its newly constructed 326,000-square-foot North American headquarters in Florham Park; while law firm K&L Gates exercised a lease renewal option for 52,000 square feet at 1 Newark Center in Newark.
Central New Jersey
- The overall availability rate increased for the fifth consecutive quarter, to 21.0 percent — its highest level in two years — up from 20.3 percent the previous quarter and 19.8 percent year over year.
- Eisner Amper and Hatch Mott MacDonald each signed leases for greater than 80,000 square feet at 111 Wood Avenue South in Iselin -- part of the Metro Park submarket -- one of only a few office buildings recently constructed in the region. In addition, Barnes & Noble signed a 73,626-square-foot renewal at 120 Mountainview Boulevard in Basking Ridge.
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Colliers International is the third-largest commercial real estate services company in the world, with over 12,300 professionals operating out of more than 520 offices in 62 countries. A subsidiary of FirstService Corporation (NASDAQ: FSRV; TSX: FSV and FSV.PR.U), it focuses on accelerating success for its clients by seamlessly providing a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and research. Commercial Property Executive and Multi-Housing News magazines ranked Colliers International the top U.S. real estate company. The latest annual survey by the Lipsey Company ranked Colliers International as the second-most recognized commercial real estate firm in the world.
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