Embed Size (px)
Citation preview
Avison Young New Jersey Office Market Overview
partnership.performance.
1st Quarter 2013
New Jersey
Overview Snapshot
Northern New Jersey
Central New Jersey
Market activity was propelled by small and mid-sized tenants establishing their footprints in attractive, transit-oriented submarkets, such as Morristown, MetroPark and Princeton. The leasing velocity in these strategic suburban submarkets is expected to continue throughout the year as larger tenants consolidate and relocate to capitalize on rail access and dynamic downtown districts with numerous amenities.
The limited number of large new leases, coupled with an increase in corporate downsizing, resulted in the ascension of the overall availability to its peak level. As of the first quarter of 2013, 22.2% of office inventory remains vacant, compared to 21.9% the previous quarter and 21.3% year-over-year. Asking rents continue to average lower, decreasing to $22.84 from $22.95 per square foot the previous quarter.
The market is seeing consistent activity as it continues to stabilize. The overall vacancy rate of 20.3% was virtually unchanged year-over-year, while asking rents, averaging $21.75 per square foot, declined more than a dollar during the same period. Demand in the pharmaceutical sector, especially along Einstein Alley in the Princeton corridor, is leading much of the activity.
partnership.performance.
First Quarter 2013
New JerseyOffice Market Monitor
Market TakeawayMarket Facts
Vacancy Rates
YE08 YE09 YE10 YE11 YE12 YTD13 0%
5%
10%
15%
20%
25%
Asking Rents
YE08 YE09 YE10 YE11 YE12 YTD13 $21.00
$22.00
$23.00
$24.00
$25.00
Net Absorption
YE08 YE09 YE10 YE11 YE12 YTD13 (6,000,000)
(4,000,000)
(2,000,000)
0
2,000,000
New Jersey OverviewThe first quarter of 2013 revealed a flat New Jersey office market still recovering from Hurricane Sandy and statewide corporate consolidations. However, glimmers of hope can be found within suburban transit submarkets, which are seeing activity from tenants in search of live-work-play vibrancy and accessibility that will position these companies strongly to attract the next generation workforce.
Despite the consolidation of large office users and the worst hurricane in state history, New Jersey posted its highest annual job growth since the dot-com explosion, according to the U.S. Bureau of Labor Statistics. During 2012, 66,400 jobs were gained, including 59,100 in the private sector. Recent employment gains should bode well for the state’s office market beginning in the latter part of this year and throughout 2014.
For the first quarter of 2013, negative net absorption of 277,000 square feet contributed to a slight increase in overall vacancy, from 21.2% to 21.4%. Average asking rents dipped slightly to $22.38 per square foot (psf ) from $22.59 psf in the fourth quarter of 2012.
Overall, first-quarter office market activity in New Jersey was propelled by small and mid-sized tenants establishing their footprints in attractive, transit-oriented submarkets, such as Morristown, Metropark and Princeton. The leasing velocity in these strategic suburban submarkets is expected to continue throughout the year as larger tenants consolidate and relocate to capitalize on rail access and dynamic downtown districts with numerous amenities. State incentive packages also continue to energize the market. This was the case for Honeywell who decided to keep its corporate headquarters in New Jersey following a two-year negotiation.
Visionary developers are beginning to address the state’s growing number of suburban office parks that are being left behind by the ongoing consolidation and relocation of large tenants. For example, in Northern New Jersey, Vision Equities, which is redeveloping the former Alcatel-Lucent complex in Whippany for Bayer, has expressed interest in acquiring the company’s soon-to-be vacated Wayne and Montville facilities for possible redevelopment. Additionally, in Central New Jersey, Somerset Development has been named the designated redeveloper of the former Bell Labs property, comprising an existing 2-million-square-foot (msf) building and 473 acres in Holmdel. As more of the large corporate business parks are redeveloped to better satisfy the needs of today’s corporate tenants, the business parks will facilitate, rather than hinder, positive absorption.
Largest New Jersey Transactions
Trends to Watch
Market Drivers: Health Services, Technology/Telecommunications, Manufacturing (includes Pharmaceutical),
Active Markets: Bergen East, Metro Park/Woodbridge, Princeton, Route 24.
Fascinating Fact: Since February 2010, New Jersey private sector employment has increased by 120,600 jobs (United States Bureau of Labor Statistics).
© 2012 Avison Young. The information contained herein was obtained from sources deemed reliable and is believed to be true; it has not been verified and as such, cannot be warranted nor form any part of any future contract.
Tenant Name Address City Square Feet
Covance, Inc. 206-210 Carnegie Center West Windsor 225,000
Dr. Reddy's Laboratories College Road Princeton 105,000
Zoetis (Pfizer) 100 Campus Drive Florham Park 98,105
Contact InformationJeffrey Heller Managing Director of New Jersey973.753.1100 | [email protected]
Matthew Dolly Vice President of Research973.898.4016 | [email protected]
1120 Headquarters PlazaWest Tower, 4th FloorMorristown, NJ 07960
www.avisonyoung.com
Northern New Jersey OverviewThe limited number of large new leases, coupled with an increase in corporate downsizing, resulted in the ascension of the overall availability rate in Northern New Jersey to its peak level. Large blocks of space vacated on the Hudson Waterfront by UBS and Marsh & McClennan contributed to the increase, in addition to the recent announcement by Goldman Sachs that it will be vacating a portion of its space at its Jersey City office tower, the tallest office building in New Jersey.
Zoetis, Pfizer’s animal-health company spinoff, signed the largest lease during the quarter, taking 98,105 sf at 100 Campus Drive in Florham Park. It is anticipated, however, that Pfizer’s consolidation plans will result in large blocks of vacant space at Giralda Farms in Madison. Honeywell’s decision to remain in New Jersey was a win for the state, however, a large corporate headquarters will be vacated. The group Citizens for Better Planning in Morris Township views the Honeywell departure as a potential opportunity for redevelopment, a common theme among recently vacated large single-tenant corporate headquarters locations.
As of the first quarter of 2013, 22.2% of office inventory remains vacant, compared to 21.9% the previous quarter and 21.3% year-over-year. Asking rents continue to average lower, decreasing to $22.84 from $22.95 psf the previous quarter.
Central New Jersey OverviewThe Central New Jersey office market is seeing consistent activity as it continues to stabilize. The overall vacancy rate of 20.3% was virtually unchanged year-over-year, while asking rents, averaging $21.75 psf, declined more than a dollar during the same period.
Demand in the pharmaceutical sector, especially along Einstein Alley in the Princeton corridor, is leading much of the activity. At Carnegie Center, Covance renewed two leases totaling approximately 225,000 sf which included an expansion of an additional 9,000 sf. Otsuka also leased space at Carnegie Center, and will occupy approximately 80,000 sf. The company is leaving behind a long-term 102,000 sf sublease at University Square, but is believed to be on the hunt for additional space in this market. A bit further to the north, Dr. Reddy’s Laboratories signed new leases totaling 105,000 sfs at College Road in Princeton.
Despite some positive signs in the Central New Jersey office market, MetLife recently announced it will be closing its Somerset office as part of a nationwide consolidation, and shedding jobs during the next three years. The news is a blow for the Piscataway/Somerset submarket, which is still struggling to recover from the glut of office space left behind by Fortune 500 giants such as AT&T in the early 2000s.
