New Jersey Office Market to Struggle in 2013
NEW JERSEY OFFICE MARKET TO STRUGGLE IN 2013
--Several large deals, positive absorption inspire guarded optimism, but impacts
of Sandy, future economic question marks challenge recovery--
NEW JERSEY, January 10, 2013 – The Northern and Central New Jersey office markets faced added adversity in the fourth quarter of 2012 as hurricane Sandy and “fiscal cliff” trepidation both made landfall. These recent challenges, coupled with state budget concerns, ongoing job growth woes, and bitter interstate competition will likely hold leasing flat through at least the first half of 2013, according to the Fourth Quarter Northern and Central New Jersey office leasing market report from Colliers International New Jersey.
The overall average asking rent in Northern and Central New Jersey for the fourth quarter was $23.89/sf, down from $24.23/sf the previous quarter and $24.40/sf compared with fourth quarter 2011. Leasing activity slowed substantially in the fourth quarter, registering just over 1.5 million square feet, which equates to only 62 percent of the third quarter total and just 55 percent of the second quarter total.
Despite the challenging quarter, net absorption experienced a modest positive gain of 329,243 square feet, wrapping up the calendar year on a high note. Though not a surefire indicator of performance in the year to come, at the very least, it propels the market into 2013 with guarded optimism.
“Potential headwinds are on the horizon with significant economic challenges to be met in 2013 on the national stage and state level,” said Robert Martie, Executive Vice President of the Colliers International New Jersey region, who also noted that the ‘fiscal cliff,’ though averted in some respects, kicks the can on pressing issues such as the national debt ceiling and scheduled sequestration. “New Jersey faces a tough fiscal road ahead, coming to grips, with a $705 million budget shortfall that has the possibility of doubling by June. Under current economic situations, market indicators will likely struggle to gain any upward momentum and remain flat through the first half of 2013.”
The report did reveal that the flight-to-quality seen in recent quarters seems to have reversed its course. Class A leasing velocity, which had steadily increased in market share compared to total office leasing in the first three quarters of the year, dropped significantly in the fourth quarter, to 48.4 percent, down from a yearly high in the third quarter of 57 percent. This may point to an emerging trend seen in the state; the increasing focus on redevelopment and re-fitting of older stock. For many market players, this is an encouraging sign, reflecting the market’s ability to adapt as the source of demand evolves.
Other figures from the fourth quarter 2012 include:
Northern New Jersey
· Pearson Education, which earlier this year signed a 200,000-sf lease of new space in Hoboken along the Hudson Waterfront, witnessed the groundbreaking of its new facility at Waterfront Corporate Center III.
Central New Jersey
· Biomet Spine and Bone Healing Technologies announced in early November its 102,000-sf lease at 399 Jefferson Road in Parsippany, while Prism Capital Partners, the owner of the building, sweetened the deal for Biomet with a commitment to provide 28,000 square feet of additional space on a build-to-suit basis for an affiliated subsidiary.
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About Colliers International
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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