The Northern and Central New Jersey office market witnessed a continued slowdown in the pace of leasing activity in the first quarter of the year, according to JLL. The state posted 1.3 million square feet in transactions this quarter, a 40.0 percent drop from the 2.2 million square feet in deals signed in the final quarter of 2017. Additionally, most of the demand witnessed during the past year was fueled by smaller-sized leases.

“Northern and Central New Jersey saw vacancy rates dip below 24.0 percent this quarter for the first time since early 2009,” said Stephen Jenco, vice president and director of suburban tri-state office research. “The decline was predominately due to the removal of 1.7 million square feet of office product from the inventory. These former office buildings are on the road to being razed or converted to alternative uses.”

Around 40.0 percent of the office space removed from the inventory was located in the Parsippany submarket. The anticipated demolition of several buildings in the market pulled the Class B vacancy rate down to 33.0 percent, compared with more than 40.0 percent at year-end 2017. This brought the Parsippany Class B vacancy rate to its lowest level in three years. Among the largest properties taken out of the inventory were two buildings totaling nearly 290,000 square feet at 1515 Route 10. The buildings are expected to be demolished to make way for a new mixed-use project planned by Stanbery Development LLC.

Approximately 489,730 square feet of office space were in various phases of development within the Northern and Central New Jersey office market during the first quarter of 2018. The 402,530-square-foot Ironside Newark redevelopment project accounted for most of the new construction. The latest project underway was a 42,000-square-foot, build-to-suit facility for GS1 US Inc. at Princeton South Corporate Center in Ewing.

Highlights of the first quarter of 2018 include:

• The Northern and Central New Jersey Class A vacancy rate has remained above the 25.0 percent level since year-end 2016.
• The Northern and Central New Jersey Class B vacancy rate retreated more than one percentage point from year-end 2017 to 21.2 percent, as most of the office buildings removed from the inventory were of Class B quality.
• The Northern and Central New Jersey average asking Class A rental rate for direct space climbed 2.0 percent from year-end 2017 to just above $30.20 per square foot, with most of this increase attributed to higher rents in the Waterfront submarket.
• The Hudson Waterfront continued to maintain the highest Class A rent in the state, posting an average asking rental rate of nearly $44.60 per square foot in the first quarter. Metropark’s average asking rental rate of nearly $34.40 per square foot represented the highest Class A rent in Central New Jersey.
• While a rising supply of sublease space boosted the Route 24 Class A vacancy rate to 28.3 percent by year-end 2017, an uptick in demand pulled the vacancy rate below 28.0 percent three months later. Nearly 37,800 square feet was absorbed in the Route 24 Class A office market, which represented the largest volume of absorption in Northern New Jersey during the first quarter. Recent transactions included Lonza America Inc.’s signing of a lease expansion and extension totaling more than 77,000 square feet at 412 Mount Kemble Avenue in Morristown. The chemicals and biotechnology company will be vacating 48,580 square feet in Allendale as part of this expansion. In addition, W2O Group relocated from Morristown into 25,000 square feet at 100 Campus Drive in Florham Park.
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JLL is a leader in the northern/central New Jersey commercial real estate market, with more than 1,000 professionals and support staff providing agency leasing and property marketing, tenant representation, industrial services, strategic consulting, occupancy planning, workplace strategies, project and development services, property and facility management, and investment sales/capital markets services to New Jersey's leading corporate tenants, investors and landlords. The firm, which assists clients from three full-service offices in Parsippany, Iselin (Metropark) and East Rutherford, also acts as a local service provider for JLL’s global and national corporate clients in need of real estate assistance in New Jersey. JLL’s New Jersey operations were honored by NJBiz magazine as one of its 2015 Best Places to Work in New Jersey.

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $145 billion. At the end of the third quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of over 80,000. As of September 30, 2017, LaSalle Investment Management had $59.0 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit ir.jll.com.