As employers in New Jersey’s top industries demand first-class office accommodations, the state’s rents continue to rise, according to Transwestern’s First-Quarter 2016 Office Market report. Buoyed by the prevailing desire among office workers to work in amenity-rich environments in northern New Jersey, asking rents in this area are now a dollar higher than the overall state average for the first time in five years.
A prime example of the extreme interest in first-class accommodations can be found in the Hudson Waterfront submarket at Waterfront Corporate Center III in Hoboken. The 500,000-square-foot building, which is owned by SJP Properties, recently signed Rubbermaid for a new lease and saw technology company Jet.com double its space. Delivered to the market less than 18 months ago, the property is nearing full occupancy.
While still favorable to rates across the Hudson River, rents in the Hudson Waterfront submarket are now typically in the high $30s per square foot and, in some cases, approaching $50 per square foot.
When looking at the mix of new leases, expansions and renewals that were signed during the first quarter, it’s clear that tenants are willing to pay more for quality. Tenants seemingly won’t settle for less than state-of-the-art work environments, reflected by the fact that landlords continue to move rents higher at Class A buildings that have enjoyed high demand or where enhancements have been made.
When high-quality space is not readily available to tenants, companies seek new construction opportunities or to redevelop antiquated properties. Examples include:
- UPS, which broke ground on a new 200,000-square-foot technology center in Parsippany that’s projected to house 1,000 employees
- Audible, which is expanding its Newark presence by renovating a historic church, allowing the company to create and retain a total of 400 jobs
- Summit Medical Group, which will occupy a new cancer center in Florham Park that’s being developed by The Rockefeller Group
In central New Jersey, significant leases were inked recently in the Somerset/Interstate 78 submarket including Linde Americas relocating its Americas headquarters to an approximately 116,000-square-foot space and Hunterdon Healthcare signing a new lease for approximately 57,000 square feet.
Additional highlights from the report include:
- While the state’s vacancy rate increased slightly to 16 percent from 15.9 percent, it remains improved from 16.3 percent this time last year.
- Year-over-year net absorption was greater than 1 million square feet for the seventh consecutive quarter.
- The New Jersey economy continues to improve and now has an unemployment rate that is 0.6 percentage points below the national rate.
- As biotech continues to grow in New Jersey, New York-based venture capital firms that fund the industry are seeking to relocate companies to the Hudson Waterfront.
As the New Jersey Partnership for Action remains focused on retaining and growing the state’s core industries of financial services, health care, life sciences and technology, investors are taking the necessary steps to cater to companies in these sectors. And as the state continues to report strong private sector job growth, the need for top-quality office space should continue to grow.
Read the full Q1 2016 New Jersey Office Outlook here.