Average Asking Rent Reaches All-Time High for Second Time in Past Three Quarters
July 17, 2019
FLORHAM PARK, NJ – The New Jersey office market recorded its fifth consecutive quarter of positive net absorption, driving the state’s average asking rent to a historical peak of $27.22 per square foot, marking the first time the average has ever exceeded $27 per square foot. Vacancy rates across the state have continued to improve, reaching a 10-year low, according to Transwestern Commercial Services’ Second-Quarter 2019 Office Market Report.
Multiple submarkets throughout the state are experiencing higher than 5% year-over-year growth in rents including Woodbridge/Metropark, Edison South, Parsippany Region, Hudson Waterfront, Wayne/Paterson, Somerset/Interstate 78 East. Of the state’s 21 submarkets, 15 are experiencing higher rents year over year and compared to the previous quarter. Additionally, 13 of the 21 submarkets are experiencing occupancy levels higher than the state average.
“Continued demand for high-quality office space is supporting both successful repositioning of existing assets within prime locales and this cycle’s first speculative ground-up office development. These factors are putting upward pressure on overall market rents,” said Matthew McDonough, TCS Managing Director. “The steady success of the New Jersey commercial real estate market is encouraging investors to move forward with new development plans throughout the state, in both urban and suburban areas.”
There are several major commercial real estate projects underway that indicate strong performance in both urban and suburban submarkets. These include the groundbreaking of Toll Brothers’ 1000 Maxwell Lane in Hoboken; 350,000 square feet of office space planned in Morristown by SJP Properties and Scotto Properties; and the Silverman Group’s plans for more than 100,000 square feet of office space above existing retail properties in Morristown.
The largest new leases were signed in the suburbs by life sciences companies including the IQVIA sublease for 115,000 square feet in the Somerset/I-78 East submarket and Genmab U.S. Inc. for 90,000 square feet in the Princeton submarket. Additional industries leasing commercial property in the suburbs during the quarter included law firms, professional services firms and healthcare companies, while government tenants were particularly active in Newark.
“The U.S. economy reached the longest expansion in U.S. history and at the same time, we’re seeing some remarkable trends and growth in the office sector,” said Matthew Dolly, New Jersey Research Director at TCS. “However, the Grow New Jersey tax credit program expired with no replacement and remained under scrutiny, which may pose some challenges to attracting and retaining businesses. The minimum wage increase could also impact hiring and potentially decelerate overall growth.”
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