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3rd Quarter Office report

by Steven Muller - Nov 08, 2021 4:56pm

ECONOMY: Modest Recovery Continues for the New Jersey Economy The Northern New Jersey unemployment rate continued to trend downward over the last quarter, falling another 200 basis points (bps) to 6.5%. Total employment for the state increased by 5.5% in the past year, fueled by eight straight quarters of job growth. Since this time last year, the private sector added 195,300 jobs, including 52,900 over the last three months. In that time, office-using industries have recorded modest gains, up 5.0% annually. SUPPLY & PRICING: Dispositions Continued to Outpace Demand as Occupancies Trended Lower in Q3 While Northern New Jersey’s vacancy rate climbed another 40 bps since midyear to 22.0%, the quarterly increase was much more modest than previous quarters. Some large vacancies in Jersey City, Nutley, and Morris County came online throughout the third quarter, accounting for much of the occupancy loss recorded. However, sublease vacancies remained flat since the previous quarter as some tenants have pulled back spaces from the market. Some vacant office product is anticipated to be repurposed in markets such as Parsippany, Bergen County, and Essex County, which should help stabilize the elevated vacancy levels. Meanwhile, asking rents on average have remained steady over the last quarter, although they have edged higher by 1.9% in the last year. Asking rents in Morris County have yielded the strongest rent growth (+2.0%) over the last 12 months as higher-priced office space has flooded the marketplace. DEMAND: YTD Leasing Activity Steady But Below Pre-pandemic Levels Year-to-date new leasing volume reached 2.6 million square feet (msf), nominally below the total recorded last year at this time. Third quarter demand was highlighted by Cigna’s 196,700square-foot (-sf) relocation from Franklin Lakes to Morris Plains. Four new transactions greater than 20,000 sf were inked during the quarter while another four renewals in that size range were completed, including Samsung’s 84,213-sf extension on Challenger Road in Ridgefield Park. More than 1.9 msf of renewals were completed since the start of 2021, 11.8% higher than one year prior. As touring activity has been on the rise this year along with some large transactions in the immediate pipeline, fourth quarter demand totals in areas such as Bergen County, the Hudson Waterfront, and parts of Morris County are projected to climb precipitously. The return of state incentives have already paid off as retailer Party City received just under $10 million to move its headquarters and bring more than 350 new jobs to Woodcliff Lake.

ECONOMY: Modest Recovery Continues for the New Jersey Economy The Northern New Jersey unemployment rate continued to trend downward over the last quarter, falling another 200 basis points (bps) to 6.5%. Total employment for the state increased by 5.5% in the past year, fueled by eight straight quarters of job growth. Since this time last year, the private sector added 195,300 jobs, including 52,900 over the last three months. In that time, office-using industries have recorded modest gains, up 5.0% annually. SUPPLY & PRICING: Dispositions Continued to Outpace Demand as Occupancies Trended Lower in Q3 While Northern New Jersey’s vacancy rate climbed another 40 bps since midyear to 22.0%, the quarterly increase was much more modest than previous quarters. Some large vacancies in Jersey City, Nutley, and Morris County came online throughout the third quarter, accounting for much of the occupancy loss recorded. However, sublease vacancies remained flat since the previous quarter as some tenants have pulled back spaces from the market. Some vacant office product is anticipated to be repurposed in markets such as Parsippany, Bergen County, and Essex County, which should help stabilize the elevated vacancy levels. Meanwhile, asking rents on average have remained steady over the last quarter, although they have edged higher by 1.9% in the last year. Asking rents in Morris County have yielded the strongest rent growth (+2.0%) over the last 12 months as higher-priced office space has flooded the marketplace. DEMAND: YTD Leasing Activity Steady But Below Pre-pandemic Levels Year-to-date new leasing volume reached 2.6 million square feet (msf), nominally below the total recorded last year at this time. Third quarter demand was highlighted by Cigna’s 196,700square-foot (-sf) relocation from Franklin Lakes to Morris Plains. Four new transactions greater than 20,000 sf were inked during the quarter while another four renewals in that size range were completed, including Samsung’s 84,213-sf extension on Challenger Road in Ridgefield Park. More than 1.9 msf of renewals were completed since the start of 2021, 11.8% higher than one year prior. As touring activity has been on the rise this year along with some large transactions in the immediate pipeline, fourth quarter demand totals in areas such as Bergen County, the Hudson Waterfront, and parts of Morris County are projected to climb precipitously. The return of state incentives have already paid off as retailer Party City received just under $10 million to move its headquarters and bring more than 350 new jobs to Woodcliff Lake.

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