Limited New Construction and Increased Redevelopment Bolster Leasing Activity
January 08, 2020
FLORHAM PARK, N.J – New Jersey’s office market recorded nearly 10 million square feet of positive absorption during the final seven years of the 2010s, according to Transwestern Commercial Services’ Fourth-Quarter 2019 Office Market Report. The market more than recovered following the Great Recession of 2008, after hemorrhaging more than 5 million square feet of occupancy losses during a five-year period.
Positive net absorption was recorded in 2019 despite a slight setback during the fourth quarter. Solid occupancy growth was spread throughout the state with increased leasing activity in the Bergen Central, Morristown, Newark/Essex Urban, Princeton, and Wayne/Paterson submarkets. Morris County led Northern New Jersey in total leases signed during the quarter, with several deals between 15,000 square feet and 35,000 square feet in the Parsippany submarket. Meanwhile, Central New Jersey was led by Middlesex County with increased transaction volume in the Woodbridge/Metro Park submarket.
“While past expansions were centered around new construction, this was the decade of redevelopment, with limited new product and essentially no threat of overbuilding,” said Matt McDonough, Transwestern Managing Director. “Office investors and landlords gained tremendous success through value-add opportunities, upgrading well-located and outdated product, while adding amenities to create a more hospitable environment for today’s office tenants and their employees.”
Nearly half of leases signed in the fourth quarter of 2019 were renewals or extensions. The largest lease of the quarter was a renewal signed by The Bank of New York Mellon’s subsidiary Pershing, extending its 400,000-square-foot global headquarters lease on the Hudson Waterfront in Jersey City through 2037. Other notable leases included Promotion in Motion, which scooped up nearly half of the 224,000-square-foot formal global headquarters of The Hertz Corp. in Park Ridge.
After achieving a historic peak, the average rent fell back slightly to $27.38 per square foot. Of the state’s 21 submarkets, 16 were higher when compared to a year prior with several submarkets experiencing double-digit year-over-year increases, including Bergen East, Edison South, Short Hills/Millburn and Woodbridge/Metro Park. Office rents in fourth quarter 2019 were 10.2% higher than the decade earlier.
“Though many are preparing for an anticipated economic slowdown, both large and small business owners in the state remain optimistic and are expecting profitability in 2020,” said Matthew Dolly, New Jersey Research Director. “An increasing number of suburban New Jersey townships are also entertaining redevelopment proposals, which should increase the competitiveness of the market.”
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