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News release

PARSIPPANY, NJ

Jones Lang LaSalle Sees Overall Vacancy Rate Rise in New Jersey

Corporate restructurings, rightsizings outpace demand in Garden State office market in 3rd quarter of 2013


PARSIPPANY, NJ, October 3, 2013 — New Jersey’s overall vacancy rate rose slightly in the third quarter of 2013 as a weak employment market and corporate restructurings continue to drive down demand for office space. The state’s overall vacancy rate increased from 24.2 percent at mid-year to 24.6 percent in the third quarter.

After adding new jobs in five out of the first six months of the year, the lingering effects of Hurricane Sandy resulted in the loss of 10,700 jobs in the state during July. Another 1,500 jobs were shed in August as gains in education and health services were offset by losses in the professional services and financial services sectors.

“The professional and financial services sectors have historically been drivers of demand for space In New Jersey,” said Robert Kossar, executive managing director and market director for JLL’s New Jersey and Long Island operations. “The lack of significant employment gains by these vital sectors has cast a shadow over the office market, where limited demand is being countered by corporate restructurings and rightsizings. These forces have caused the overall vacancy rate to range near the 25.0 percent level for the past three years.”

Approximately 1.6 million square feet in leasing transactions were recorded in the Northern New Jersey and Central New Jersey office markets in the third quarter of 2013, slightly below the approximately 1.9 million square feet in deal volume posted at mid-year 2013. Leasing activity through the third quarter of the year approached 5.2 million square feet, substantially below the 8.0 million square feet posted at the same point in 2012.

Approximately 577,000 square feet of office space was under construction during the third quarter of 2013 in the Northern and Central New Jersey office markets, compared with 948,000 square feet underway one year earlier. Nearly 1.2 million square feet of office space has been completed throughout the state since the beginning of the year, with more than 92.0 percent of these completions involving build-to-suit projects.

Highlights of the third quarter of 2013 include:

  • The statewide overall vacancy rate for Class A and Class B space increased to 24.6 percent in the third quarter of 2013, compared with 24.2 percent at mid-year. Northern New Jerseyposted a vacancy rate of 24.8 percent, compared with 24.1 percent in the previous quarter; while Central New Jersey’s vacancy rate remained unchanged at 24.5 percent.
  • The statewide overall vacancy rate for Class A and Class B space decreased to 24.6 percent in the third quarter of 2013, compared with 25.6 percent one year earlier. Northern New Jersey recorded a vacancy rate of 24.8 percent this quarter, compared with 23.6 percent one year earlier; while Central New Jersey’s vacancy rate was 24.5 percent in the third quarter, compared with 28.7 percent one year earlier.
  • Overall average asking rental rates throughout the state rose to $24.80 per square foot in the third quarter of 2013, compared with $24.57 per square foot at mid-year. Central New Jersey saw rents grow to $23.38 per square foot from $23.22 per square foot the previous quarter; while Northern New Jersey saw rates increase to $25.64 per square foot from $25.36 per square foot at mid-year. The state’s Class A product saw rents increase to $27.15 per square foot, an increase of $0.15 per square foot from the previous quarter, while Class B buildings saw rents expand to $20.82 per square foot, a boost of $0.20 per square foot from mid-year.
  • Overall average asking rental rates throughout New Jersey increased to $24.80 per square foot in the third quarter of 2013, compared with $23.82 per square foot one year earlier. Central New Jersey saw rents rise to $23.38 per square foot this quarter, compared with $22.36 per square foot one year earlier; while Northern New Jersey saw rates rise to $25.64 per square foot in the third quarter of 2013, compared with $24.93 per square foot one year earlier. The state’s Class A product saw rents increase to $27.15 per square foot, an increase of $0.86 per square foot from one year ago, while Class B buildings saw rents expand to $20.82 per square foot, a boost of $0.43 per square foot from one year ago.
  • The urban submarkets of Newark and the Hudson Waterfront continued to report some of the lowest Class A vacancy rates in the state in the third quarter of 2013 — 10.3 percent and 17.8 percent, respectively — and maintained the highest average asking Class A rental rates — $33.73 per square foot and $37.28 per square foot, respectively. Metropark’s average asking Class A rental rate of $31.48 per square foot was the third highest in the state, while the submarket posted a Class A vacancy rate of 20.5 percent, one of the lowest Class A vacancy rates recorded in the Central New Jersey market.

 

JLL is a leader in the northern/central New Jersey commercial real estate market, with more than 500 professionals and support staff providing agency leasing, tenant representation, industrial services, strategic consulting, project and development services, property management and investment sales/capital markets services to New Jersey's leading corporate tenants, investors and landlords. The firm, which assists clients from three full-service offices in Parsippany, Iselin (Metropark) and Hasbrouck Heights, also acts as local service provider for JLL global and national corporate clients in need of real estate assistance in New Jersey.

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 $46.3 billion of real estate assets under management. For further information, visit www.jll.com.