A handful of new deals with large tenants helped stabilize New Jersey’s office market in the third quarter, staving off a decline as many other large users continue to wait before making new moves of their own, according to a new report from Colliers International.
Office vacancy in northern and central New Jersey held steady in the quarter, thanks in large part to Danish pharmaceutical company Novo Nordisk, which committed to the 770,000-square-foot former Merrill Lynch facility in Plainsboro, the report said. Matt Dolly, head of research for the New Jersey region of the real estate services firm, said the move comes as other companies cope with the lack of modern class A office space, which leads them to pursue build-to-suit options and “extend(s) their search time in the market.”
But a deal like the Novo Nordisk lease can create momentum in the market, he said.
“It’s taking a long time for some of these companies to make decisions, but it’s just nice to see a couple of them land right now,” Dolly said. “It’s always a positive when deals are done. It’s positive energy, and deals usually bring more deals, so it’s a good start, for sure.”
The state’s office market stands to benefit from the increasingly business-friendly climate under Gov. Chris Christie and the assurance he will stay in New Jersey for the 2012 presidential election, Dolly said. Meanwhile, incentive programs like the state’s Urban Transit Hub tax credit are being welcomed by large companies.
Yet the incentives can create further delays as prospective tenants and movers evaluate their options, the report noted. Dolly also said new activity can is being held up by “anything they hear that’s negative — whether it’s the economy, whether it’s a terrorist threat, whether it’s the bad weather we’ve had here in New Jersey.” That means that current tenants are waiting to renew their leases and “not rushing to sign new deals.”
“Things like that just put a stop to any deal,” he said. “So they’re not making any unforced moves. … We’re hoping that will change.”
For the quarter, 20.1 percent of office inventory remains available in northern and central New Jersey, compared to 20.2 percent in the second quarter and 20.3 percent a year ago, the report said. The change reflects a slight rise in vacancy in the northern region and a small drop in vacancy in the central markets.
Third-quarter highlights in New Jersey’s office market also include two large commitments that did not immediately impact the rate of available space. One of those commitments was the decision by Pearson Inc., the publishing company, to move from Upper Saddle River to a new waterfront building in Hoboken. The other was the August announcement by Mack-Cali Realty Corp., the Edison-based real estate investment trust, that it will build a new 203,000-square-foot building in Parsippany for hospitality giant Wyndham Worldwide.
Dolly acknowledged that the move by Pearson will leave behind newly vacated office space in Bergen County, but he is hopeful private-sector job growth, which has grown modestly for six straight months, will help the market in the coming years.