As Rebound Continues, New Jersey Office Market Experiences Highest Mid-Year Leasing Velocity Since 2007
SADDLE BROOK, N.J. (September 5, 2013) –New Jersey’s mid-year leasing velocity showed significant improvement over that of last year according to CBRE Group, Inc. At 3.57 million sq. ft., mid-year leasing velocity is up over 15% from 2012 and over 20% from 2011. Significant transactions in the second quarter included Spectra Laboratories’ 190,000-sq.-ft. expansion and renewal at 8 King Road in Rockleigh; Pfizer’s 113,616-sq.-ft. lease at 1 Giralda Farms in Madison; and Bausch and Lomb’s 90,000-sq.-ft. sublease at 283 King George Road in Warren.
The office market’s momentum slowed in the second quarter as compared to Q1 2013. Q2 2013 leasing velocity was down 16.2% from last quarter despite strong activity by the pharmaceutical and healthcare industries. The pharmaceutical and healthcare industries, one of the New Jersey’s leading employers, represented 44.8% of the second quarter’s 1.63 million sq. ft. of transaction activity. Pfizer’s move to 1 Giralda Farms and Spectra Labs’ renewal and expansion are clear indicators of their continued commitments to the area, with the State’s highly educated workforce being a major influence to remain in New Jersey. Though strong, this activity was not enough to offset the increase in the availability rate as large blocks of space continued to hit the market, thereby increasing the market availability rate to 21.5 percent, 52 basis points above the prior year. Additionally, the effects of flight-to-quality over the past few years slowed in the second quarter. Class A leasing accounted for 59.3% of leasing velocity in 2Q 2012 and 46.2% in Q2 2013.
“While the slowing of the flight-to-quality trend has had a negative effect on forward momentum, the New Jersey office market is still in the midst of an ongoing recovery,” said Leo Paytas, senior vice president, CBRE New Jersey. “With four blocks of space over 100,000 sq. ft. coming onto the market in the second quarter, it’s not surprising that net absorption was down. However, we are extremely encouraged that mid-year leasing is at 3.57 million sq. ft. — its highest level since 2007, prior to the economic downturn.”
With several large transactions closing this quarter, the Route 287/78 submarket posted the highest leasing activity at 283,618 sq. ft. As a result of Spectra Laboratories’ expansion and renewal, the Palisades submarket posted a second quarter leasing velocity of 229,459 sq. ft., followed by Morristown’s 184,956 sq. ft.
Asking rents decreased $0.20 from the first quarter, closing the second quarter at $24.03 per sq. ft. Direct average asking rents decreased by $0.14 to $24.55 per sq. ft., while sublet average asking rents decreased $0.71 per sq. ft. to $18.17 per sq. ft. The Waterfront remains New Jersey’s highest priced submarket at $31.77 per sq. ft., followed by the Princeton submarket at $27.95 per sq. ft.
The adaptive reuse trend came continued in the second quarter as M&M Realty Partners purchased 1111 Durham Avenue in South Plainfield, with plans to demolish the existing 236,710 sq.-ft. office building to construct a multifamily property.
“With New Jersey’s unemployment rate down nearly a full percentage point since the start of the year, we anticipate leasing activity to remain high throughout the remainder of 2013,” said David Opper, senior vice president, CBRE New Jersey. “As companies continue to tap into the state’s deeply educated workforce, New Jersey will remain a premier choice among office tenants.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.