CUSHMAN & WAKEFIELD: N.J. OFFICE ACTIVITY MIXED, INDUSTRIAL STRONG
Third Quarter Findings Point to Stabilization and Growth in Select Markets
EAST RUTHERFORD, N.J. – October 20, 2011 – (RealEstateRama) — Third quarter 2011 research findings by commercial real estate services firm Cushman & Wakefield, Inc. point to mixed performance in the office market and continued strong industrial activity.
In the state’s central counties, office leasing has far exceeded the recent past, both in the size and quantity of transactions; the northern counties have remained consistent, without much growth or significant new activity. Within the industrial sector, healthy leasing and positive absorption through the first three quarters of the year have brought restored confidence to the marketplace.
OFFICE OVERVIEW
Central New Jersey saw 2.9 million square feet in leasing activity through the first nine months of 2011, exceeding activity at this time last year by 58 percent and the 2010 year-end total by more than 7 percent.
One third quarter lease – the largest in the central counties since 2005 – was largely responsible for this jump. It involved Novo Nordisk’s commitment to the 770,000-square-foot 800 Scudders Mill Road in Plainsboro; the firm will relocate its headquarters to the property from Princeton. Also of note, Qualcomm Flarion Technologies, Inc. renewed its 125,472-square-foot office at 500 Somerset Corporate Blvd. in Bridgewater.
This increase has pushed the overall vacancy rate in Central New Jersey down 1.2 percentage points from one year ago, to 21.8 percent currently. At the same time, a number of large blocks have become available in the central counties recently, particularly along the Somerset Route 78 corridor (including 155,000 square feet at 300 Somerset Corporate Blvd. and 80,032 square feet at 106 Allen Road in Bernards Twp.).
“While spaces have come online in Central New Jersey, increased activity – especially by pharmaceutical firms – along the I-78 Corridor has set the tone for the office market,” Medina said. “Companies are attracted to high-quality Class A opportunities there.”
According to Medina, Central New Jersey’s recovery also is apparent with rising asking rents. After remaining flat for more than a year, the overall asking rent rose to $23.61 per square foot, increasing $0.75 per square foot from mid-year 2011.
While not quite as impressive as performance in the central counties, office leasing in Northern New Jersey remained steady through the third quarter, with 3.5 million square feet of year-to-date activity, as compared to 3.2 million square feet last year at this time. Several significant renewals fueled activity in the northern counties. Among them, Medco Health Solutions, Inc. re-committed to its 77,262-square-foot office at 19-00 Pollitt Drive in Fair Lawn.
The largest new Northern New Jersey office lease of the quarter involved Phibro Animal Health, which leased 44,204 square feet for its headquarters at 300 Frank W. Burr Blvd. in Teaneck. In Morris Township, medical specialist Atlantic Health Systems, Inc. leased 40,800 square feet at 465 South Street.
Some 19 million square feet of office space remains available in Northern New Jersey, translating to an overall vacancy rate of 17.8 percent at the end of September. This represents a 0.5 percentage point increase from mid year.
“The increase can be attributed, in part, to 11 spaces over 20,000 square feet coming onto the market during the third quarter,” Medina said. This included 67,000 square feet at Montville East Corporate Center in Pine Brook, and 45,000 square feet at 2 Gateway Center in Newark.
Within this context, the overall asking rental rate has held steady, dropping only $0.04 per square foot to $25.49 per square foot. “The numbers indicate that Northern New Jersey remains flat, yet the Class A office market continues to show signs of stepped-up demand,” Medina said. “This is especially true in the Hudson Waterfront market, where average asking rental rates are $33.65 per square foot.”
INDUSTRIAL RECAP
Evidence of growth and recovery has gained momentum through the year in the New Jersey industrial market. Year-to-date, more than 17.2 million square feet of new industrial lease transactions have been recorded.
“This represents the highest output since 2008 and a 69.6 percent year-over-year increase,” Medina said. “Seventeen new transactions larger than 100,000 square feet closed during the third quarter alone.”
The largest involved global IT and logistics company Synnex Corporation, which leased 400,000 square feet at 201 Middlesex Center Blvd. in South Brunswick. Other notable industrial leases included Central Garden and Pet’s 340,000-square-foot commitment at 1100 Cranbury South River Road in South Brunswick, National Retail Transportation’s lease of 224,935 square feet at 2400 83rd Street in North Bergen and Continental Terminal’s 177,359-square-foot signing at 40 Western Road in Kearny.
On the construction front, which remains limited, Petrucci has announced the state’s first speculative construction since 2008. The company will develop a 570,000-square-foot building in Edison. Additionally, the third quarter saw build-to-suit project starts for tenants Wakefern and FedEx.
“The market still houses a number of large available blocks of space, most prominently in the Meadowlands and Exit 8A submarkets,” Medina said. “Additionally, average asking rents remain steady, registering at $5.60 per square foot at the end of September. This indicates that New Jersey is still very much an industrial tenant’s market, with prevalent flight-to-quality shifts. Going forward, we expect this to begin to change in the near term, with asking rent gains in select markets.”
3rd Quarter Marketbeat Reports can be accessed at http://www.caryl.com/clientdetails.cfm?clientid=4.
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