10B — May 10 - 23, 2013 — New Jersey — Mid Atlantic Real Estate Journal


C entral N ew J ersey

he office market in Central New Jersey is beginning to show a By Matthew J. Dolly, Avison Young Seeing the big picture: Central New Jersey office rebounds from recession T indication of market direction, a more thorough picture devel- ops when analyzing data over a longer period.

improvement when compar- ing three-year trends for nine consecutive quarters ending during the first quarter of 2008. As the economy began to spiral downward, the office market trailed. For 16 quar- ters, vacancy rates climbed consistently. While the Great Recession lasted from December 2007 through June 2009, the Na- tional Bureau of Economic Re- search did not make it official until December 2008. Busi- nesses, however, anticipated

the announcement throughout 2008 and the commercial real estate market lagged. For eight straight quarters between the second quarter of 2009 and the first quarter of 2011, vacancy rates were at least four points higher when making three- year comparisons, peaking at 6.2% during the fourth quarter of 2010, immediately following the announcement that the recession ended in June 2009. The increase accounted for nearly 5.5 million s/f of space being returned to the market.

During the past three years, the office market in Central New Jersey has begun to re- cover. Since the first quarter of 2010, the overall vacancy rate has declined by 1.9%, as nearly 1.4 million s/f of of- fice space has been absorbed. When measuring over three years, the vacancy rate has de- creased four consecutive quar- ters through the first quarter of 2013, though at more modest levels than during the previous three quarters. While certainly not at the level of consistency displayed prior to the Great Recession, it appears the office market is strengthening. Reasons for this success include demand return in the pharmaceutical sector and the popularity of commuter rail markets such as Princeton and Metro Park. In addition, ten- ants have been either renewing or extending their leases unless they find a compelling reason to make a costly move. While there is still a glut of space, there is not much that would be considered a “trade up.” As a result, new construction and newly renovated proper- ties have become attractive. Examples include Church and Dwight, which recently took occupancy of a newly built, 250,000 s/f headquarters in Ew- ing. Eisner Amper and Hatch Mott MacDonald each signed leases at the new 111 Wood Ave. South inMetro Park. EMC Corp. signed a lease for 81,683 s/f at the newly renovated Center 78 in Warren, while Otsuka America Pharmaceu- tical and Blackrock Financial Management, Inc. moved into new construction at Univer- sity Square in Princeton. Dr. Reddy’s Laboratories signed new leases at College Rd. in Princeton, and Novo Nordisk is renovating a 770,000 s/f facility in Plainsboro. This momentum is expected to continue despite some ob- stacles, including MetLife’s an- nouncement that it will close its Somerset office, which is a blow for the struggling Piscataway/ Somerset submarket. However, other large blocks such as the Bell Labs complex in Holmdel and the former Continental In- surance building in Cranbury are being redeveloped, which will take nearly 2.5 million s/f of unused space out of the equation, effectively lowering continued on page 12B

c o n s i s t e n t trend of im- proving occu- pancy levels, much like it did prior to t h e G r e a t Re c e s s i o n . The overall vacancy rate

When compared year-over- year, the overall vacancy rate is virtually unchanged as of the first quarter of 2013, as 20.3% of inventory is available for lease, compared to 20.0% a year ago. However, when studying the rate over a three-year pe- riod, the market appears to be improving at a steady pace. Prior to the Great Recession, the office market exhibited

Matthew J. Dolly

has decreased for six of the past nine quarters, and while quar- terly comparisons give some

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