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News release

PARSIPPANY, NJ

Jones Lang LaSalle Sees Overall Vacancy Rates Inch Down in New Jersey

Conversion of vacant office buildings throughout the state pushes down vacancy rates


PARSIPPANY, NJ, July 2, 2013 — New Jersey’s overall vacancy rate continued to inch down in the second quarter of 2013, fueled by an uptick in demand for vacant suburban office buildings offering redevelopment opportunities. The state’s overall vacancy rate declined from 25 percent at midyear 2012 to 24.2 percent this quarter.

Among the high-profile conversions recently announced was a 495,000-square-foot building at 1 Continental Drive in Cranbury that was leased to Lam Cloud Management, which has plans to convert the property into a high-tech data center. The building, owned by The Sudler Cos., had been vacant for the past four years and represented one of the largest blocks of space in Central New Jersey. In addition, Memorial Sloan-Kettering Cancer Center acquired a 287,000-square-foot former Lucent Technologies building at 480 Red Hill Road in Middletown for redevelopment as an outpatient facility.

“A large portion of the activity witnessed during the first half of 2013 can be attributed to vacant office buildings being repositioned for alternative uses,” said Daniel J. Loughlin, managing director and Jones Lang LaSalle’s office brokerage lead in New Jersey. “Vacant buildings considered functionally obsolete by today’s office users are likely to remain on the radar screen for potential medical, mixed-use, multi-family or assisted living conversions.”

Approximately 1.5 million square feet in leasing transactions were recorded in the Northern New Jersey and Central New Jersey office markets in the second quarter of 2013, slightly below the approximately 1.7 million square feet in leasing transactions posted during the first quarter of 2013.

Less than 950,000 square feet of new construction was underway during the second quarter of 2013 in the Northern New Jersey and Central New Jersey office markets, compared to 813,670 square feet one year earlier. More than 90 percent of these projects are build-to-suit developments.

Highlights of the second quarter of 2013 include:

  • The statewide overall vacancy rate for Class A and Class B space was 24.2 percent at midyear 2013, compared to 24.6 percent at the close of the first quarter of 2013. Northern New Jersey posted a vacancy rate of 24.1 percent, compared to 23.9 percent in the previous quarter; while Central New Jersey recorded a vacancy rate of 24.5 percent, compared to 25.7 percent in the first quarter of the year.
  • Overall average asking rental rates throughout the state rose to $24.57 per square foot, compared with $24.47 per square foot in the first quarter of 2013. Central New Jersey also saw rents grow to $23.22 per square foot from $22.80 per square foot the previous quarter; while Northern New Jersey saw rates drop to $25.36 per square foot from $25.53 per square foot in the first quarter of the year. The state’s Class A product saw rents increase to $27.00 per square foot, a boost of $0.05 per square foot from the previous quarter, while Class B buildings saw rents expand to $20.62 per square foot, an increase of $0.07 per square foot in the first quarter of 2013.
  • The urban submarkets of Newark and the Hudson Waterfront again reported some of the lowest Class A vacancy rates in the state at midyear 2013 — 8.3 percent and 14.5 percent, respectively — and maintained the highest average asking Class A rental rates — $33.64 per square foot and $37.62 per square foot, respectively. Metropark’s average asking Class A rental rate of $31.88 per square foot was the third highest in the state, while the submarket posted a Class A vacancy rate of 19.6 percent, the lowest Class A vacancy rate recorded in the Central New Jersey market. Demand for Class A space in all three submarkets, when combined with limited new construction and close proximity to commuter rail stations, has helped to maintain asking rents and lower vacancy rates.

JLL is a leader in the New York tri-state commercial real estate market, with more than 1,600 of the most recognized industry experts offering brokerage, capital markets, property/facilities management, consulting, and project and development services. In 2012, the New York tri-state team completed approximately 23.8 million square feet in lease transactions, arranged capital markets transactions valued at $1.57 billion, managed projects valued at nearly $7.0 billion, and oversaw a property and facilities management portfolio of 102.1 million square feet and an agency leasing portfolio of 76.0 million square feet.

About Jones Lang LaSalle
Jones 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 and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $47.7 billion of real estate assets under management. For further information, visit www.jll.com.