Mid Atlantic Real Estate Journal — January 17 - 30, 2014 — 13A


2014 F orecast

By Matt McDonough, Transwestern New Jersey NJ office tenants stop playingmusical chairs: urgency leads tomore office leasing activity in 2014


t takes a long time for com- mercial real estate mar- kets to change. But when

decided to change their office layout from many private of- fices to a more “open and col- laborative” space, generating another need for 200,000 s/f of first-class office space. Sensing limited quality op- portunities large enough to accommodate their needs, both more moved rapidly, suddenly precluding some of the 50,000- 80,000 s/f Tenants that had been looking into space in the market. The 200,000 s/f prospect focused their attention on 300 Kimball Dr., a newly reno- vated, 400,000 s/f first-class office building in Parsippany,

for which Transwestern is in charge of leasing. In order to accommodate their request, we were forced to make the kind of call that we had not made in over five years – asking another tenant to refocus their attention on a different space in the building. After working with a pro- spective tenant on 50,000 s/f for over six months, we had to suggest to that they focus their attention to a different location within our building. With available space becoming limited at 300 Kimball, delays from the 50,000 s/f prospect suddenly disappeared and we

quickly went to lease. Simultaneously, the same pharmaceutical company relo- cating fromHunterdon toUnion began focusing their attention on the Class A headquarters of a large European firm that had expressed interest in con- solidating their Morris County, NJ, facility from 150,000 to 80,000 s/f. The pharmaceutical company needed the space by the spring of 2014, generating a very immediate need for 80,000 s/f of class A space from the European company. After making an overly ag- gressive proposal for space at 300 Kimball, the European

company was dismayed when our response was significantly above proposals that we had issued as recently as last sum- mer. Pushed by the large phar- maceutical company’s urgent need for space in spring 2014, and facing formidable competi- tion for space at 300 Kimball, the European company pros- pect abandoned interest in 300 Kimball and is moving quickly to execute a lease at their sec- ond choice. These are merely antidotal evidence of a market shift here in New Jersey, but there are some very real indicators Continued to page 21A

they do, they change quite quickly. Cor- p o r a t i o n s seem to read the same tea- leaves andact in concert. In New Jersey,

Matt McDonough

we are starting to see the first signs of a change, and they seem to be accelerating. The recession of 2008-2009 caught many by surprise. Strong leasing activity dur- ing 2006 and 2007 came to an abrupt halt. An anemic recovery in 2010 was quickly extinguished in the summer of 2011. Since then, there has been no sense of urgency in the market. The longer a tenant waited, the better deal they were able to achieve. The deal cycle stretched out and tenants began testing the market early. Occupancy dates stretched from a normal 9 to 10 months to 14 to 18 months out. Multiple site visits and end- less technical reviews typically ensued. Instead of two or three rounds of negotiations, five or six became more common. Attorney comments trickled in slowly and when they did arrive, they were overly ex- tensive. With no market forces pushing them, no decisions were made. The overall thought from tenants was, “The space was there last quarter. It will be there next quarter too.” But this is starting to change. Even as recently as the summer of 2013, tenants were still drag- ging their feet as transactions languished. But by December, tenants were stepping up to make commitments. The sense of urgency, absent for so long, was suddenly back. Precipitated by a spurt of ac- tivity by a few big players, and compounded by a lack of new or freshly renovated first class of- fice space, there were suddenly too many tenants and too little space in the New Jersey office market. Transactions that had been pending for six to seven months were suddenly on the front burner. A large pharmaceutical com- pany’s move from Hunterdon to Union County spawned two Morris County requirements in excess of 100,000 s/f. Another large pharmaceutical firm


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400 Park Ave, 16th Floor, New York, NY 10022 300 Kimball Dr, 1st Floor, Parsippany, NJ 07054

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