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Consolidations and Economic Conditions Add Stress to New Jersey Office Market, According to Cassidy Turley Report

10/23/2012

 

Consolidations and Economic Conditions Add Stress to New Jersey Office Market, According to Cassidy Turley Report

A new office layout model has placed continued negative pressure on absorption rates and serves as a potential roadblock for office demand growth and a significant market recovery, according to the third quarter Office Market Report published by Cassidy Turley, a leading commercial real estate services provider in the U.S. The report also states that significant market recovery will not be attained until there is continual and substantial improvement in the overall unemployment rate.

The Northern New Jersey office market experienced 259,049 square feet of negative absorption, and the vacancy rate slightly edged higher to 15.4% from 15.3% in the previous quarter, marking six consecutive quarters of negative demand. The average asking rental rate increased by $0.04 to $24.82 per square foot. A majority of leasing activity this quarter was from smaller leases, below 20,000 square feet.

The Central New Jersey office market contracted as a few notable corporations – including Sanofi-Aventis – acted upon consolidation initiatives or exited the state in an effort to minimize operational costs. The market experienced 724,382 square feet of negative demand, causing vacancy rates to increase to 17.1% from 16.4% in the previous quarter. The year-to-date absorption for Central New Jersey now exceeds the annual negative absorption totals of both 2010 and 2011.

The average asking rent increased this quarter, indicating that tenants and landlords are coming to terms with market values and pricing. The rate rose $0.35 to $23.59 per square foot.

“We have noticed that more tenants are consolidating operations and adjusting their needs by reorganizing office space and taking less square footage per employee,” explained Raymond Trevisan, Managing Principal of New Jersey for Cassidy Turley. “Companies are concerned about the economic conditions and planning accordingly. I don’t expect to see positive absorption until there is better newson the jobs front that will help companies feel more confident and comfortable with the idea of corporate expansion.”

PSE&G’s decision to remain at 80 Park Plaza in Newark and renew an 856,226-square-foot lease for an additional 15 years stands out as a key transaction that helped contribute to the stabilization of the submarket’s vacancy rates in the third quarter.

“PSE&G has maintained a corporate presence in the city for many years and had the company vacated its current premises, the Newark submarket would have endured a significant increase in vacancy rates, elevating the historically high rates it is experiencing today,” noted David A. Simon, SIOR, Executive Managing Director, Principal, New Jersey for Cassidy Turley. “Furthermore, it would have negatively impacted the momentum created by the Prudential and Cablevision transactions.”

New development remains scarce and current projects under construction are primarily

100-percent pre-leased. Trevisan said popularity is growing for building LEED-Certified buildings or retrofitting buildings.

“It’s a win-win for both parties,” stated Trevisan. “Large corporations are increasingly willing to commit to energy-efficient buildings, while the new building standards allow owners to reduce operating expenses.”

Notable office transactions in the third quarter include:

·       Eisner Ampner, which took 87,030 square feet at 111 Wood Avenue South in the Woodbridge/Edison submarket and Hatch Mott Macdonald, which signed on for 81,371 square feet at the same site.

·       Aptalis Pharmaceutical, which signed a 52,320-square-foot expansion/extension at 100 Somerset Corporate Center in the Somerset/I-78 submarket.

·       John Hancock, which purchased 7 and 9 Roszel Road in Princeton for $90 million.

·       TA Realty, which acquired the 240,000-square-foot 170 Wood Avenue South in Woodbridge/Edison for $75 million.

Click here to download Cassidy Turley’s New Jersey Office Q3 2012 Market Reports.

About Cassidy Turley
Cassidy Turley is a leading commercial real estate services provider with more than 3,600 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. Cassidy Turley enhances its global service delivery outside of North America through a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets.  Please visit www.cassidyturley.com for more information about Cassidy Turley.

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10/23/2012 - 16:22

Source

DTZ

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