CUSHMAN & WAKEFIELD REPORTS SLOW START FOR REAL ESTATE IN 2012
N.J.’s Strong, Steady Fundamentals Bode Well, with Increased Activity Expected
EAST RUTHERFORD, N.J. – April 27, 2012 – (RealEstateRama) — With the exception of office leasing in Central New Jersey, the Garden State commercial market experienced a slow start to 2012, according to Cushman & Wakefield, Inc. The commercial real estate services firm’s first quarter office and industrial research findings indicate that while tenant and investment activity remains modest, market fundamentals are steady and showing signs of slow improvement, according to Gualberto “Gil” Medina, New Jersey executive managing director.
OFFICE OVERVIEW
Following a year of the highest activity since before the recession, Northern New Jersey office leasing totaled just 932,447 square feet during the first quarter. This represents a 31.2 percent year-over-year decrease. The largest new transaction occurred at 3 Century Drive in Parsippany, where health services group Emergency Medical Associates, LP leased 43,809 square feet. Additionally, satellite broadcaster Dish Network took 38,500 square feet at 2 Executive Drive in Fort Lee.
On the other hand, Central New Jersey experienced robust office leasing, with activity rising 29.5 percent year-over-year to 964,088 square feet, with particularly high levels of activity along the I-78 Corridor. In the state’s largest year-to-date transaction, automation software and cloud technology solutions corporation Synchronoss Technologies moved into a 75,581-square-foot space at 200 Crossing Boulevard in Bridgewater. In Old Bridge, ICIMS committed to 47,104 square feet at 90 Old Matawan Road.
Investment sales activity saw a slower start to 2012 statewide, with only four office transactions closed during the first quarter. In Northern New Jersey, Cole RE Investments purchased 8 Sylvan Way (173,156 square feet) in Parsippany for $53 million, and Hudson Equities Management Group acquired 15 Mercedes Drive (59,259 square feet) in Montvale for $10.7 million. Both properties traded from The Hampshire Companies.
In Central New Jersey, reproductive Medicine Association of NJ purchased 140 Allen Road (62,250 square feet) in Bernards Township from SJP Properties for $7.67 million. Additionally, in Woodbridge, UAE Exchange purchased a 32,000-sf building at 1000 Woodbridge Center Drive from Gregory Investment Corporation for $4.1 million.
“Activity likely will remain modest through mid year,” Medina said. “Yet during the third and fourth quarters, we expect to see a rise in both office leasing and sales activity. And even though things may have started off slowly – particularly in terms of Northern New Jersey leasing and investment sales across the board – office market fundamentals remain strong statewide.”
In fact, direct average asking rental rates continued to rise during the first quarter in Northern New Jersey, climbing $0.07 per square foot year-over-year and $0.28 per square foot since the end of 2011 – to a current $26.09 per square foot. The overall office vacancy rate in the northern counties rose just 0.1 percentage point since last quarter, to 18.0 percent. In Central New Jersey, the overall vacancy rate fell a full percentage point year-over-year to a current 20.2. The direct average asking rental rate rose to $23.96 per square foot, up $0.93 year-over-year and $0.42 since the end of 2011.
“We anticipate that this positive progress will continue,” Medina said. “Office vacancy rates will remain fairly constant, while asking rental rates will continue on a slow upward trajectory.”
INDUSTRIAL RECAP
Nearly 4.6 million square feet in industrial leasing in Northern and Central New Jersey represented an 18.8 percent year-over-year decrease. Still, a number of notable transactions closed, particularly in the central counties. Among them, pet supply retailer Petco leased 781,300 square feet at 257 Prospect Plains Road in Cranbury. In Robbinsville, computer and electronics retailer Systemax committed to 500,102 square feet at 24 Applegate Drive.
Investment activity involving existing industrial product totaled 1.6 million square feet during the first quarter, representing a 44.4 percent drop in year-over-year volume. The largest sale involved Heller Industrial Park’s acquisition of 1 Heller Park Lane (323,985 square feet) in Somerset for $11.1 million. In Teaneck, electrical contractor Grant Electric purchased 411 Alfred Avenue (184,000 square feet) for $6.2 million, while in North Bergen skin care manufacturer DermaRite Industries purchased 7777 West Side Avenue (126,618 square feet) for $7.87 million.
Statewide, the industrial vacancy rate increased by 0.2 percentage points during the first quarter of 2012, for an overall rate of 9.8 percent. “This slight increase was due to several large blocks of space, which entered the market in Northern New Jersey and negatively impacted absorption,” Medina said. “For context, Central New Jersey, where rates are more competitive because of the added distance to Port and NYC in-roads, experienced a 0.2 percentage point decrease in vacancy.”
The direct average asking rental rate for industrial remained steady since end of 2011 at $5.62 per square foot. “Direct asking rental rates this year should hold as vacancy slowly drops,” Medina said. “Looking ahead, Central New Jersey’s vacancy rate is expected to decrease more quickly than in the northern counties. The virtually non-existent supply of ‘big box’ in that market and high demand for the same will shape developer and investor decisions.”
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Media Contact:
Evelyn Weiss Francisco: evelyn (at) caryl (dot) com, (201) 796-7788, www.twitter.com/carylcomm
