2C — July 29 - August 11, 2016 — Brokerage Directory — M id A tlantic
Real Estate Journal
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Increase in deal volume puts downward pressure on overall vacancy rate JLL reports boost in leasing activity at Midyear 2016
AST RUTHERFORD, NJ — After less than 2.0 million s/f of leasing transactions were completed in the Northern and Central New Jersey office market during the first quarter of 2016, leasing ve- locity rebounded to more than 2.4 million s/f three months later, according to JLL . The uptick in leasing velocity pulled the Northern and Central New Jersey overall vacancy rate down 20 basis points from early 2016 to 24.4% at mid-year. “Nearly two-thirds of the leases signed during the sec- ond quarter were concentrated in Northern New Jersey as E
office occupiers were active in the Hudson Waterfront, Parsippany and Rte. 280 Cor- ridor markets,” said Jonathan Meisel , managing director with JLL. “The banking/finan- cial services sector accounted for approximately one-quarter of signed leases in the state, followed by life sciences/phar- maceutical companies, which were involved with nearly 22% of transactions during the sec- ond quarter.” Nearly 326,700 s/f of space was absorbed in the Northern and Central New Jersey of- fice market during the second quarter, putting a dent in the
562,300 s/f of negative net ab- sorption recorded in early 2016. The Hudson Waterfront and Rte. 280 Corridor submarkets each posted more than 75,000 s/f of positive net absorption in NorthernNew Jersey, while the Metropark submarket led Cen- tral New Jersey with 82,220 s/f of absorption. Buildings burdened by pro- longed vacancies and consid- ered functionally obsolete by today’s office users are in- creasingly being targeted for demolition to make way for new projects or converted to alterna- tives uses. Bergen County was the setting for a large portion of
this recent activity. The Bergen County overall vacancy rate dropped to 23.3% in the second quarter compared to more than 25% in early 2016. A leading factor behind this decline was the removal of 1 Lake St. in Up- per Saddle River from the office inventory. Mack-Cali Realty Corporation began demol- ishing the 474,800 s/f former Pearson Education building to make way for housing develop- ment at the site. Three notable build-to-suit projects, totaling approximate- ly 440,445 s/f, were under con- struction in the Northern and Central New Jersey office mar-
ket during the second quarter of 2016. Build-to-suit projects are underway for Metropolitan Life Insurance Co. (MetLife) in Whippany, NRG Energy, Inc. in Princeton and Zoetis Inc. in Parsippany. MetLife’s 185,000 s/f building at 67Whippany Rd. is expected to be delivered dur- ing the third quarter. Highlights of the second quarter of 2016 include: •Northern and Central New Jersey’s overall vacancy rate dropped to 24.4% at midyear 2016 compared to 24.6% earlier in the year. The state’s over- all vacancy rate was 60 basis points less than a year ago. •The Northern and Central New Jersey average asking rental rate for direct space ticked $0.20 higher from early 2016 to $28.10 psf. Addition- al availabilities marketed at higher rents contributed to the recent uptick. Year-over-year, the class A rental rate grew 1% from $27.82 psf at midyear 2015. •With an average asking rental rate of nearly $38.00 psf at midyear 2016, the Hudson Waterfront maintained the highest class A rent in the of- fice market. Metropark’s asking rental rate of nearly $31.00 psf represented the highest class A rent in Central New Jersey. •Offering highway access and commuter rail service, the Metropark submarket provided the stage for a large portion of recent class A demand in the state. After approaching 25% at year-end 2014, the Metropark class A vacancy rate has since fallen to 15%. Hackensack University Health Network/ Meridian Health Systems and Bank of America were respon- sible for some of the largest leases recently completed in this submarket. •Additional vacancies ex- ceeded demand in Parsippany’s class A office market, lead- ing to 116,480 s/f of negative net absorption in the second quarter. This represented the largest volume of negative net absorption in the Northern New Jersey class A market. B&G Foods, Ferrero USA and Tangoe, Inc. were among the companies active on the leasing front, with demand countered by 181,600 s/f placed on the market for sublease by Daiichi Sankyo at 2 Hilton Court. The Parsippany class A vacancy rate subsequently increased from less than 26% in early 2016 to 27%, reaching its high- est point in a year. n
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