The Central New Jersey office market posted positive results for the fourth quarter, despite feeling the effects of Hurricane Sandy, according to a fourth quarter 2012 Office Market Report published by Cassidy Turley, a leading commercial real estate services provider in the U.S.
The Central New Jersey office market experienced 121,699 square feet of positive absorption, causing the vacancy rate to move to 16.9% from 17% in the previous quarter. In Northern New Jersey, the office market remained relatively unchanged with a vacancy rate of 15.4% and negative net absorption of 54,903 square feet.
“Hurricane Sandy brought devastating damage to inventory and caused corporate setbacks through weeks of lost productivity across New Jersey, yet these results for Central New Jersey are encouraging, if not hopeful,” said Cassidy Turley Managing Principal Raymond Trevisan. “The results also highlight the resolute strength and natural resilience of the office market in a number of the state’s key submarkets.”
For example, the Somerset-78 East submarket experienced sizable positive absorption in the fourth quarter with 296,339 square feet of demand. The submarket’s vacancy rate at the close of the year was among the lowest in Central New Jersey at 13% percent, dropping from 14% percent over the quarter. In one notable transaction, the 371,400-square-foot Class A Center 78 in Warren captured EMC Corporation as an anchor tenant in a 81,683-square-foot lease.
The Woodbridge-Edison submarket also proved to be a standout with a flurry of activity in 2012. The 258,993-square-foot 111 Wood Avenue South, which was delivered less than two years ago, is now entirely leased after securing tenants such as Eisner Ampner and Hatch Mott MacDonald. Both firms signed on for more than 80,000 square feet.
A number of submarkets in Northern New Jersey also reported respectable leasing activity. The Bergen Central submarket recorded the highest amount of positive absorption in the fourth quarter with 71,036 square feet and a total of 194,909 square feet for the year. Notable lease transactions include Orbcomm’s 31,159-square-foot lease at 395 West Passaic Street in Rochelle Park and New York Life’s 26,811-square-foot deal at 250 Pehle Avenue in Saddle Brook. Additionally, in the Meadowlands submarket, Vitamin Shoppe took three floors at 300 Harmon Meadow Boulevard in Secaucus totaling 56,281 square feet.
On the construction front, two buildings totaling 262,000 square feet were delivered in the fourth quarter in Central New Jersey with the 250,000-square-foot 500-600 Princeton South Corporate Center accounting for the majority of new space. Household consumer products/packaged goods company Church & Dwight will occupy the site in the second quarter. In Northern New Jersey, two smaller office buildings were delivered totaling 95,670 square feet: 1 DeForest Avenue in Summit, which is now fully leased, and 109 Christopher Street in Jersey City.
Remaining new construction is extremely limited in Central New Jersey with the majority of new projects being smaller Class B properties in the 15,000 to 20,000-square-foot range. Additional development in Northern New Jersey remains scarce and current projects under construction are primarily 100% pre-leased, single-tenant buildings.
Changes in unemployment were encouraging, with a net of 20,200 private sector jobs added in the state in 2012. As of November, four out of 10 private sector industries reported employment gains including professional and business services, trade, transportation and utilities.
“The positive trend of private sector employment is a good sign for the market,” added New Jersey-based Office Specialist Charles Parmelli, SIOR, CCIM of Cassidy Turley. “However, corporate consolidations and a push toward more efficient office floor plans will continue to present challenges to substantial office space absorption in the short term.”
Notable office transactions in the fourth quarter include:
• In a sale-leaseback with Bank of America, a joint venture of Fortress, Normandy Real Estate Partners, Sansome and Skyline Pacific Properties acquired the 1.8-million-square-foot Merrill Lynch Hopewell Campus in Pennington for $365 million, or approximately $203 per square foot.
• The largest lease transaction in Northern New Jersey for the quarter was in the Parsippany submarket with Biomet Bone & Spine Healing Technologies signing a 74,000-square-foot lease at 399 Jefferson Road. Also, the largest transaction for 2012, was the firm’s 15-year renewal for its 856,226-square-foot headquarters in Newark.