With 67% of New Jersey’s adult residents fully vaccinated at mid-year and COVID-19 occupancy restrictions lifted, office occupiers continued to execute their re-entry plans during the second quarter, according to the JLL US Q2 2021 Office Outlook report released on Aug. 16, and those factors are helping set the stage for pent-up demand to gain momentum during the second half of the year.
Specifically in New Jersey, corporate restructurings boosted the amount of sublease space to 7.7 million square feet at mid-year, which is the highest supply since 2003.
With the anticipation that more employees will work remotely, even after the COVID-19 pandemic is over, New Jersey companies have been pruning their real estate holdings, which unleashed a rising tide of sublease space in the office market.
This trend continued in Q2 as the Northern and Central New Jersey overall vacancy rate climbed to 27.3%, compared to 26.4% in early 2021. Excluding sublease space, the direct vacancy rate ticked only 10 basis points higher from early 2021 to 22.3%.
At mid-year, the 7.7 million-square-foot supply of sublease space in the state’s office market is an increase from 6.4 million square feet seen in the earlier part of the year. Yet the high supply accounts for just over 18% of total available office space, compared to a high-water mark of 40% in 2002.
Among the largest sublease availabilities recently added are 215,000 square feet from Abbvie at 5 Giralda Farms in Madison, while Eisai began marketing 118,000 square feet at 155 Tice Blvd. in Woodcliff Lake after relocating its headquarters to the ON3 campus in Clifton/Nutley.
IQVIA placed 115,000 square feet on the market for sublease at Building D at 77 Corporate Drive in Bridgewater.
While life sciences, financial services and tech sectors had historically been the leading office demand drivers, health care companies were responsible for nearly 60% of leasing velocity in Q2. Among the largest transactions was Atlantic Health System’s 533,000-square-foot lease extension and expansion at 435, 465 and 475 South St. in Morristown. In addition, QualCare signed a 145,430-square-foot renewal at 30 Knightsbridge Road in Piscataway.
Nearly 4.5 million square feet of tenant requirements were navigating the state’s office market at mid-year, which was a nearly 10% increase in activity from the end of 2020.
Furthermore, more than 1.9 million square feet of deals were signed in Q2–the highest volume seen since Q3 2020.l