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Limited leasing velocity combined with consolidations keep overall vacancy rate just below 25 percent during the first quarter
PARSIPPANY, NJ, April 19, 2013 — Although the New Jersey overall vacancy rate declined from 25.5 percent at year-end 2012 to 24.6 percent, the office market remained in neutral gear during the first quarter of 2013. Garden State employers continued to consolidate excess space holdings, while seeking to reduce operating expenses.
The leading factor behind the decline in the state’s overall vacancy rate was the removal of nearly 2 million square feet of obsolete office space from the Northern New Jersey market. Combined with limited leasing velocity, the inventory adjustment pulled the state’s overall vacancy rate lower during the first quarter.
“Job creation remains the single most critical component of any sustained rebound for New Jersey’s office market and the state continues to lag behind national job creation,” said Daniel J. Loughlin, managing director and Jones Lang LaSalle’s office brokerage lead in New Jersey. “While 2012 marked the third consecutive year of employment gains, the New Jersey unemployment rate has remained above 9.0 percent since mid-2009. Approximately 66,400 jobs were created in 2012, which represented the highest yearly increase in more than a decade. While the state’s unemployment rate slipped to 9.3 percent, it remained well above the 7.6 percent national rate.”
Approximately 1.7 million square feet in leasing transactions were recorded in the Northern New Jersey and Central New Jersey office markets during the first quarter of the year, which was slightly below the 1.9 million square feet in leasing transactions posted during the fourth quarter of 2012. Renewals and lease extensions continue to define much of the leasing velocity the state has witnessed during the past several quarters. More than one-half of the leases completed in early 2013 involved pharmaceutical and biotechnology companies, followed by financial services and the technology business sectors.
Nearly 1.4 million square feet of new construction was underway during the first quarter of 2013 in the Northern New Jersey and Central New Jersey office markets, compared to 934,000 square feet one year earlier. However, more than 90 percent of these projects are build-to-suit developments. “The two “R’s” — relocations and rightsizings — generated most of the headlines during the past year and are expected to remain part of our office vocabulary in 2013,” said Stephen Jenco, vice president of suburban Tri-state research for Jones Lang LaSalle. “Many companies continue to re-evaluate their office requirements in response to the fragile economic recovery, which has resulted in fluctuating quarterly vacancy rates.”
Highlights of the first quarter of 2013 include:• The statewide overall vacancy rate for Class A and Class B space was 24.6 percent, compared to 25.5 percent during the fourth quarter of 2012. Northern New Jersey posted a vacancy rate of 23.9 percent, compared to 23.7 percent in the previous quarter; while Central New Jersey recorded a vacancy rate of 25.7 percent, compared to 28.2 percent at year-end 2012.• Overall average asking rental rates throughout the state rose to $24.47 per square foot, compared with $23.65 per square foot in the fourth quarter of 2012. Central New Jersey also saw rents grow to $22.80 per square foot from $22.12 per square foot the previous quarter; while Northern New Jersey saw rates rise to $25.53 per square foot from $24.83 per square foot at year-end 2012. The state’s Class A product saw rents increase to $26.95 per square foot, a boost of $0.74 per square foot from the previous quarter, while Class B buildings saw rents expand to $20.55 per square foot, an increase of $0.60 per square foot from year-end 2012. Despite these increases, asking rents are anticipated to ebb and flow until expanding real estate requirements can overcome the consolidations impacting the market.• Northern New Jersey’s urban submarkets of Newark and the Hudson Waterfront continued to report some of the lowest Class A vacancy rates in the state in the first quarter of the year — 8.5 percent and 14.1 percent, respectively — and maintain the highest average asking Class A rental rates — $33.66 per square foot and $37.72 per square foot, respectively.
JLL is a leader in the New York tri-state commercial real estate market, with more than 1,750 of the most recognized industry experts offering brokerage, capital markets, property/facilities management, consulting, and project and development services. In 2011, the New York tri-state team completed approximately 15.9 million square feet in lease transactions, arranged capital markets transactions valued at $1.57 billion, managed projects valued at more than $6.8 billion, and oversaw a property and facilities management portfolio of 63.6 million square feet and an agency leasing portfolio of 49.8 million square feet.
About Jones Lang LaSalleJones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet. Its investment management business, LaSalle Investment Management, has $47.0 billion of real estate assets under management. For further information, visit www.jll.com.
George Shea, Mark Faris - Shea Communications