According to a recent Jones Lang LaSalle report, Class A office space in New Jersey’s northern and central markets reached a three-year low during the fourth quarter of 2011.
In North Jersey, the vacancy rate stood at 22.1 percent for top-level space at the end of last year. Central Jersey upscale offices were 25.1 percent unoccupied; overall, the state vacancy rate was 23.3 percent. The increase in Class A activity in the state comes from several different industries, and has been focused along I-78, central Bergen County and along the Garden State Parkway.
Shawn Straka, senior vice president at JLL, said the increased occupancy of Class A space is a great leading indicator that 2012 could be a “transition year” for the office market.
“People are starting to make decisions again. In addition, we’re seeing people starting to shift from B-plus properties, A-minus properties, trading into Class A properties,” Straka said. “They’re able to do that for a couple reasons, but most importantly, they’re getting their space to become more efficient.”
As that trend continues, “you’re going to see an uptick in rents, and what that will do will get back into a landlord’s type market,” Straka said. “Once we see that trend happens, you’ll see the Class B properties start to lease up, and vacancies start to drop in those products, as well.”
Straka said he’s seeing more tenants reviewing leases earlier than usual, sometimes several years out, to evaluate how they use their space and to take advantage of the current market conditions.
“The clear trend we’re seeing is companies looking at their current space, looking at their efficiencies and trying to position themselves for the next five to 10 years,” Straka said. “It’s not all lease-expiration driven.”