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News release

EAST RUTHERFORD, NJ

Northern, Central New Jersey Office Vacancy Rate Circles Back to 2013 Level

Vacancy rate unchanged at 24.9% as availabilities counter demand


EAST RUTHERFORD, NJ, January 13, 2015 — After inching upward to 25.1 percent during the third quarter, the Northern and Central New Jersey overall vacancy rate slipped 20 basis points to 24.9 percent by year-end, which was the same level witnessed one year ago. Limited demand matched by corporate consolidations and restructurings have caused the vacancy rate to ebb and flow near the 25.0 percent level since 2011.

Slightly over 53,900 square feet of positive net absorption was recorded in the office market during the fourth quarter compared to 117,900 square feet absorbed in the third quarter. Despite back-to-back quarters of positive absorption, the office market posted nearly 114,230 square feet of negative net absorption in 2014.

“The lack of sustained growth in employment remained a significant drag on the Northern and Central New Jersey office market all year,” said Robert Kossar, Executive Managing Director and Market Director for JLL’s New Jersey and Long Island operations. “Monthly swings between gains and losses provided the recent storyline for the state’s labor market. A gain of 3,000 new jobs in September was followed by the loss of 3,500 jobs in October. However, employment surged by 6,700 jobs in November as the construction; trade, transportation and utilities; and professional/ business services sectors posted the largest monthly gains. Despite this uptick, a recent Rutgers University economic forecast expects New Jersey to gain only 11,500 jobs in 2014 compared to 18,800 new jobs in 2013.”

The Northern and Central New Jersey office market posted slightly more than 2.5 million square feet in leasing activity in the final quarter of the year, compared to 2.4 million square feet in transactions recorded in the previous quarter. Despite the increase, total leasing velocity declined to 9.7 million square feet in 2014 from nearly 10.8 million square feet in 2013.

Mirroring third quarter activity, New Jersey’s banking and financial services companies comprised more than 40.0 percent of the total transactions completed during the fourth quarter. The information/technology and life sciences/pharmaceuticals sectors collectively accounted for more than 20.0 percent of leasing activity in late 2014.

The Northern and Central New Jersey office market posted approximately 833,700 square feet of new construction at year-end 2014, compared with nearly 1.4 million square feet underway one year earlier. Just over 10.0 percent of the current construction activity involves speculative endeavors. The speculative construction pipeline is expected to remain relatively empty until demand begins to significantly outpace corporate consolidations and restructurings.

Highlights of the fourth quarter of 2014 include:

  • The Northern and Central New Jersey overall vacancy rate decreased to 24.9 percent, compared to 25.1 percent in the third quarter of 2014. The overall vacancy rate has returned to the year-end 2013 level.
  • Demand for Class A space in the Hudson Waterfront boosted its average asking rental rate to nearly $37.90 per square foot, which represented the highest Class A rental rate in the state. The Metropark submarket’s asking rental rate of more than $32.30 per square foot represented the highest Class A rent in Central New Jersey.
  • The Newark submarket Class A vacancy rate plummeted to 18.5 percent during the fourth quarter after climbing to 25.5 percent in the third quarter. Expanding internal growth prompted Prudential Insurance to sign lease extensions for a portion of its current space at 2 and 3 Gateway Center, which pulled the vacancy rate lower in late 2014. Prudential had originally planned to vacate Gateway Center in anticipation of relocating into a 740,000-square-foot building being developed in downtown Newark. The previous decision to move out of Gateway Center was responsible for the higher vacancy rate.
  • The Route 24 submarket Class A vacancy rate surged above 31.0 percent compared to less than 25.0 percent in the third quarter as several large blocks of space impacted the market. Among these availabilities was a 374,000-square-foot building at 340 Mount Kemble Avenue in Morristown, and a 154,750-square-foot building at 10 Park Avenue in Florham Park. The Route 24 Class A vacancy rate is more than six percentage points above the Northern and Central New Jersey Class A vacancy rate.
  • The current conditions will create opportunities for tenants seeking space options within the Northern and Central New Jersey office market in 2015. Furthermore, the state is expected to maintain a proactive approach in using economic incentives programs to attract corporate investments. This was evident in the Hudson Waterfront submarket during the past year as companies including Charles Komar & Sons, Forbes Media, JPMorgan Chase, RBC Capital Markets and Thomson Reuters tapped these incentives and absorbed blocks of space in this market.

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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 East Rutherford, also acts as local service provider for JLL global and national corporate clients in need of real estate assistance in New Jersey.

About JLL
JLL (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 fee revenue of $4.0 billion and gross revenue of $4.5 billion, JLL has more than 200 corporate offices, operates in 75 countries and has a global workforce of approximately 53,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.0 billion square feet, or 280.0 million square meters, and completed $99.0 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $53.0 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.