Heading into the second quarter of the year, Cushman & Wakefield is out with a look back at how the New Jersey office and industrial sectors started 2023.

This week, the global real estate services firm announced the release of its first quarter 2023 statistics, exhibiting evidence of the persistence of flight to quality in the office space and positive net absorption in industrial.

The Garden State recorded an increase in office vacancies for the third consecutive quarter, according to Cushman & Wakefield, up to 21.2%, which the firm attributed to large blocks of sublease space returning to the market. In the first quarter of 2023, sublease space was 4.6% of office inventory, according to the report, twice the percentage it represented in the Q1 2020.

“Despite the increase in office vacancies, we are still seeing a flight-to-quality trend with continued demand for new, financially stabilized, top-tier offices in centrally located markets with best-in-class amenities,” Managing Director Todd Elfand said in a statement.

Direct average asking rents were stable in Q1, up to $31.25 per square foot, representing a 51-cent increase, as now-vacant Class A space returned to the market.

In the wake of COVID-19, many employers are still working through attempts to finetune their policies about where team members perform their work. And while leasing was slow in Q1 – totaling 2.1 million square feet, Cushman & Wakefield said – tour activity remained lively. According to the firm, that could suggest more momentum in the space for the second half of 2023.

“Looking ahead, the office market is expected to continue its slow recovery as employers navigate the new normal of hybrid work arrangements,” Elfand added.

Employers, the report said, continue to search out new and high-quality offices with a focus on central locations and in-demand amenities. That’s evidenced by recent milestones, including the Bell Works metroburb hitting 95% leased and Nexus 17 in Paramus securing 142,000 square feet in leases in February.

Meanwhile, the industrial sector saw its historically low vacancy rates steadily increase amid record construction activity and new deliveries quickly hitting the market. Nonetheless, Cushman & Wakefield pegged the figure at under 4% in both North and Central Jersey.

The sector’s positive net absorption persisted in Q1, with Central Jersey’s 2 million square feet of occupancy gains driving momentum.

North Jersey recorded negative net absorption for the quarter, Cushman & Wakefield said, due to the confluence of newly vacant space and slower demand as leasing activity normalizes following the COVID boom.

“The industrial market in New Jersey has remained resilient, with net absorption continuing its positive streak despite the wave of new vacant deliveries added to the inventory,” said Managing Director Christine Eberle. “After a historic 2022, we are seeing leasing activity revert to previous norms but with sustained demand as both asking and taking rents continuing to rise across core submarkets.”