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EAST RUTHERFORD, NJ

Jones Lang LaSalle Reports Lackluster Job Growth Drags Down New Jersey Office Market

Vacancy rates increase, rental rates decrease throughout Garden State in 4th quarter of 2013


EAST RUTHERFORD, NJ, January 13, 2014 — New Jersey’s overall vacancy rate rose slightly at year-end 2013 for the second straight quarter as lackluster employment growth and corporate restructurings continued to drive down demand for office space. Jones Lang LaSalle reported that the state’s overall vacancy rate increased to 24.9 percent in the fourth quarter of 2013 from 24.6 percent in the third quarter.

After adding an average of 6,500 jobs a month in the first half of 2013, which would have resulted in the creation of nearly 80,000 jobs in New Jersey for the year, the lingering effects of Hurricane Sandy resulted in the loss of 10,700 jobs in July. The state added an average of just 1,200 jobs per month between August and October. This was followed by 16,900 jobs added during November, with the biggest gains in the education, health services, and leisure and hospitality sectors. Since November 2012, the professional and business services sector has shed approximately 7,600 jobs, while the financial services sector recorded a small net gain. These two clusters have historically driven a large portion of the space requirements in the office market.

“The lack of sustained employment growth has dragged down the Northern and Central New Jersey office market during the past year,” said Robert Kossar, executive managing director and market director for JLL’s New Jersey and Long Island operations.

“Since September 2010, New Jersey has recovered only slightly more than one-half of jobs lost, compared with the entire country, which has recouped more than 80.0 percent of the 8.7 million jobs lost nationally. While the state’s unemployment rate had fallen to 7.8 percent in November compared to 9.6 percent one year ago, the rate remains nearly one full percentage point above the national average.“

Approximately 2.0 million square feet in leasing transactions were recorded in the Northern and Central New Jersey office markets in the fourth quarter of 2013, a drop from the approximately 2.4 million square feet in deal volume posted in the previous quarter. Total leasing activity in New Jersey for the year approached 8.3 million square feet, substantially below the 10.2 million square feet posted in all of 2012.

Approximately 1.4 million square feet of office space was under construction at year-end 2013 in the Northern and Central New Jersey office markets, compared with 1.2 million square feet 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 fourth quarter of 2013 include:

  • The statewide overall vacancy rate for Class A and Class B space increased to 24.9 percent in the fourth quarter of 2013, compared with 24.6 percent in the third quarter. This overall vacancy rate, however, declined from 25.5 percent vacancy at the end of 2012. Northern New Jersey posted a vacancy rate of 25.1 percent, compared with 24.8 percent in the previous quarter and 23.7 percent a year earlier. At 24.6 percent, Central New Jersey’s vacancy rate remained relative flat compared with 24.5 percent in the previous quarter, but dropped significantly from 28.2 percent at year-end 2012.
  • Overall average asking rental rates throughout the state fell to $24.69 per square foot in the fourth quarter of 2013, compared with $24.80 per square foot in the third quarter. However, year-end 2013 rents ended well above the $23.65 per square foot recorded one year earlier. Northern New Jersey saw rents drop to $25.60 per square foot from $25.64 per square foot the previous quarter, though again this outcome was significantly higher than the $24.83 per square foot recorded one year ago. Central New Jersey saw rates fall to $23.10 per square foot from $23.38 per square foot in the previous quarter, but also rise from $22.12 per square foot at the end of 2012. The state’s Class A product saw rents increase $0.02 per square foot from the previous quarter and $0.94 per square foot from one year ago to $27.17 per square foot. Class B rents declined $0.31 per square foot from the third quarter to $20.51 per square foot, but expanded $0.56 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 fourth quarter of 2013 — 15.4 percent and 17.0 percent, respectively — and maintained the highest average asking Class A rental rates — $34.28 per square foot and $37.40 per square foot, respectively. Newark’s Class A vacancy rate increased from 10.3 percent in the previous quarter due to additional space put on the market by Prudential at Gateway Center. The insurer is consolidating into a new building under construction in Newark. Metropark’s Class A average asking rent of $31.46 per square foot remained the third highest in the state, while the submarket posted a Class A vacancy rate of 20.2 percent, one of the lowest Class A vacancy rates in the Central New Jersey submarket.

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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.