A new Avison Young New Jersey Q4 2020 office sector report released Jan. 27, shows vacancy rates have risen 180-basis points since the first quarter of this year to 14.1 percent and experienced a 120-basis point jump since the fourth quarter of 2019, from 12.9 percent. Meanwhile, market rents dropped $.16 year over year to $30.74/square foot.
“Absorption was negative for the second straight quarter, and it seems that we are starting to see the damage done by the pandemic after a few quarters of relative calm,” said Jeff Heller, principal and managing director Avison Young New Jersey.
Jason Bloom, Avison Young research manager for the New Jersey market, adds, “We expect that in the coming year, vacancy will increase, and rents will fall as the market starts to soften.”
Several major office sector transactions closed during the previous quarter:
Bristol-Myers Squibb signed a 118,110 square-foot lease at 9 Roszel Road in West Windsor.
Passage Bio Inc. signed a 62,000 square-foot lease for lab space at the former Bristol-Myers Squibb campus in Hopewell.
Kitchen and bathroom fixture company LIXIL has agreed to lease 60,270 square-feet at the newly renovated 30 Knightsbridge Road in Piscataway.
Alexander Property Holdings acquired three properties from Piedmont Office Realty Trust this quarter. The New York City-based investor paid $130 million($176/SF) for 200 & 400 Crossing Boulevard in Bridgewater as well as 600 Corporate Drive in Lebanon
Plymouth Rock purchased their corporate HQ from Mack-Cali after signing a 129,000 square foot lease at 581 Main Street in Woodbridge in 2018.
Asia Investment Management (AIM) purchased 85 Challenger Road in Ridgefield Park from KABR Real Estate Investment Partners early in the fourth quarter.
In the report, Avison Young also states that the entire New Jersey commercial real estate market will be keeping a close eye on whether companies begin to leave the New York metropolitan area entirely to more tax appealing states in the south and west. A recent example of this thought process is Goldman Sachs who this past quarter discussed plans to move one of its large divisions out of New York City to Florida. In the past, the talent pool’s quality has forced many companies to have a significant market presence. With the rise and ease of working remotely, this becomes less of a factor. If this happens, this will fundamentally change New Jersey’s office market and make recovery a lot more challenging.