Average Rent Peaks for the Third Time in the Past Four Quarters
October 16, 2019
FLORHAM PARK, N.J – Redevelopment continues to be the main driver of growth in the New Jersey office market, with vacancy decreasing 10 basis points for five of the past six quarters. New Jersey is also recording an increase in occupancy for the sixth consecutive quarter, with positive quarterly absorption in 12 of the state’s 21 submarkets, according to Transwestern Commercial Services’ Third-Quarter 2019 Office Market Report.
“With its highly skilled workforce, New Jersey’s office market continues to attract and retain tenants in various industries across the state,” said Jim Postell, TCS Principal. “As landlords continue to revamp their properties, with private investors pumping capital into aging assets, we’re seeing the creation of suburban Class A offices with the environments needed for an exceptional employee experience.”
The largest deals of the quarter were signed in the suburbs, from differing industries, illustrating the state’s diverse tenant base. New leases include global insurance company Everest Reinsurance’s lease of 315,000 square feet at Warren Corporate Center; financial firm CIT Industries’ commitment to 215,418 square feet at 340 Mount Kemble Ave., a property currently undergoing renovations in Morristown; and pharmaceutical company PTC Therapeutics lease of 185,000 square feet at the Bristol-Myers Squibb campus in Princeton. In addition, two significant renewals included multinational electronics giant Samsung, which renewed its 235,057-square-foot lease in Ridgefield Park, and Summit Medical Group, which sold its 270,000-square-foot office campus in Berkeley Heights and consequently signed a long-term lease.
Multiple submarkets throughout the state are experiencing sustained occupancy growth, including the Bergen Central, Morristown, Newark/Essex Urban, Princeton, and Wayne/Paterson submarkets. Furthermore, 1.3 million square feet has been absorbed year over year, with third quarter being the third consecutive quarter where year-over-year net absorption was greater than 1 million square feet.
Average rents have increased to $27.44 per square foot, an all-time high for the state, with an increase of 58 cents over the past two quarters – the largest six-month increase since the second half of 2015. Of the state’s 21 submarkets, 16 are recording higher year-over-year rents, with five submarkets reaching an increase greater than 5%. The quarter saw a rise in Bergen County rents, due to strong increases within the Bergen East, Bergen Central, and Meadowlands submarkets.
“Following a quarter where smaller leases dominated the landscape, third quarter saw multiple large deals spread across different sectors, illustrating that the New Jersey suburbs remain a highly desirable place to do business,” said Matthew Dolly, New Jersey Research Director at TCS. “While growing at a moderate pace, slow and steady growth may mean the market is better prepared for a potential slowdown, compared to previous periods of prosperity that resulted in overbuilding and overexposure to weakening economic conditions.”
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