Cushman & Wakefield released its first quarter 2019 New Jersey market research findings with clear indications that the office sector is strengthening across all major fundamentals, highlighted by the lowest vacancy rate recorded in 12 years by the commercial real estate services firm. On the industrial front, the Garden State is experiencing sustained strength in leasing, new development and pricing.
The New Jersey office market’s 343,000 square feet in first-quarter net absorption pushed total absorption over the past 12 months to more than 2 million square feet. In turn, vacancy has dropped to 17.3 percent – a 30 basis dip since year-end 2018. On the submarket level, this included substantial first-quarter drops in Morristown (-370 basis points), the Meadowlands (-280 basis points), Interstate 78 Corridor (-80 basis points) and Monmouth County (-70 basis points).
A marked increase in new leasing activity is propelling these improvements. Nearly 2.3 million square feet in quarterly activity reflects a 65.7 percent year-over-year improvement and the strongest annual start since 2015.
“While small business leasing has been the constant and steady force for the New Jersey office market in recent years, mid-sized deals (20,000 to 60,000 square feet) drove 30.0 percent of new deal activity in the first quarter,” noted Cushman & Wakefield’s Andrew Judd, New Jersey market leader. “Deal volume thus far in 2019 has been diverse, with the life sciences, legal services, retail/wholesale and manufacturing industries leading the way.”
First quarter industrial leasing – totaling 7.6 million square feet – represented a 19.4 percent year-over-year increase, with big-box demand continuing unabated. eCommerce and third-party-logistics tenants led the market, accounting for four of the six industrial deals over 200,000 square feet during the first quarter. Three occurred in the Exit 8A Submarket, which alone saw more than 2.5 million square feet of new leasing activity.
The market has delivered seven industrial buildings totaling more than 2.5 million square feet to date in 2019. Illustrating the strength of pre-leasing activity in the Garden State, more than 54 percent of the square footage has been committed to, and only three buildings are fully available. Furthermore, an additional 5.7 million square feet is currently under construction, and more than half has been pre-leased.
At the end of the first quarter, the New Jersey industrial vacancy rate rested at 3.5 percent – a slight rise due to the completion of new spec projects.