Colliers Third Quarter Report: New Jersey Office Market Shows Signs of Improvement
--Industry looks to build upon stabilizing fundamentals as revised State-issued economic incentive programs scheduled to take effect--
NEW JERSEY, October 29, 2013 – The Northern and Central New Jersey office markets showed small signs of improvement in the third quarter of 2013, registering modest drops in availability rates and an uptick in asking rents, according to new research from Colliers International. There is also widespread hope that the New Jersey Economic Opportunity Act of 2013, passed in September, will add additional momentum to the State’s improving business fundamentals. With stronger economic growth and a more positive outlook, the office market could show even better performance as 2013 draws to an end and we move into 2014.
The overall availability rate declined to 20.1 percent in the third quarter, down from 20.5 percent in the previous quarter and 20.4 percent a year ago. The availability rate, however, remains persistently high, which is a result of the historically tepid employment growth and the large inventory of office properties that are ill-suited for the needs of the state’s emerging industries. The overall asking rent ticked up 8 cents in the third quarter to $23.56/sf from the second quarter’s level, but it is down from last year’s third quarter reading of $23.98/sf.
“Northern and Central New Jersey continue to show flights to quality for transactions of all sizes, as the office markets slowly stabilize and show signs of improvement,” said Robert Martie, Executive Vice President of the New Jersey region for Colliers International. “And now that the State incentive program guidelines have changed to reach a wider base of constituents, we see additional possibilities for growth.”
State incentive programs enacted by Governor Christie originally targeted key urban centers, and offered tax incentives to corporations that agreed to relocate their operations to those cities. The newly passed bill consolidates five incentive programs into two programs. One of the initiatives, The Grow New Jersey program, has the intent of covering a wider geographic area of the state. Regardless of their current location in the state, corporations are now eligible for tax incentives if they can demonstrate a plan to create jobs, or agree to renew their real estate holdings within New Jersey, rather than relocate their workforce out of state.
The thrust of these changes to the incentive programs is to assist the rural and suburban areas of the state that were severely impacted by the economic downturn and the devastation of Superstorm Sandy.
The other program under the economic act, the Economic Redevelopment and Growth Program (ERGP), is designed to be a catalyst to jump-start major redevelopment projects, passing benefits along to the tenants.
The Township of Holmdel recently sold the nearly 1.7 million-square-foot Alcatel Lucent site to Somerset Development for $27 million, the largest sale of the quarter. The site will be redeveloped into a 400,000-square-foot, same-day surgery center and will also encompass retail, residential, a golf course, and data center. While this project did not receive ERGP incentives, it is indicative of state-wide redevelopment of obsolete properties that going forward may qualify.
The long-term employment outlook for New Jersey has also brightened: private sector employment in New Jersey expanded by over 60,000 jobs over the past year.
Additional highlights from Colliers International’s 2013 third quarter analysis:
Northern New Jersey
- Novartis Pharmaceuticals signed an early 222,597-square-foot renewal at 180 Park Avenue in Florham Park, a Class A, LEED Gold certified building. In addition, T-Mobile, which considered relocating out of state, signed a 105,000- square-foot renewal at 4 Sylvan Way in Parsippany. Also, Citigroup signed one of the largest transactions in Northern NJ, subleasing 92,554 square feet from UBS at 480 Washington Boulevard in Jersey City.
- Merck Pharmaceuticals has announced plans to put its 88 acre/2 million-square-foot office/lab/warehouse campus in Summit on the market for sale, with the property available for redevelopment in 2015. As previously announced, its Whitehouse Station corporate headquarters is also being marketed for sale.
Central New Jersey
- Engineering, construction, and technical services provider URS Corp. signed a 234,160-square-foot renewal at 510 Carnegie Center in Princeton, the largest transaction of the quarter.
- Also in Princeton, Otsuka Pharmacuticals leased 50,000 square feet at 506 Carnegie Center, located in the 560 acre Carnegie Campus.
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