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Vacancy rate for state’s Class A product has hovered around 25.1% since 1st quarter of 2014
EAST RUTHERFORD, N.J., April 7, 2015 — After slipping to 24.9 percent at year-end 2014, the overall office vacancy rate for Northern and Central New Jersey ticked slightly higher to 25.3 percent in the first quarter of 2015, according to JLL. Lackluster demand compounded by corporate consolidations and restructurings have caused the vacancy rate for all building classes in Central and Northern New Jersey office markets to hover around 25.0 percent since midyear 2013.
After reporting an unprecedented 10 consecutive quarters of negative net absorption dating back to the third quarter of 2012, a rebound in demand for Class A office space in Northern New Jersey led to 114,560 square feet of absorption in the first quarter of 2015. The Northern New Jersey Class A vacancy rate subsequently retreated 30 basis points from year-end 2014 to 26.8 percent.
Northern New Jersey Class A vacancy’s lower rate can be traced to activity in the Parsippany submarket. With more than 286,000 square feet absorbed, this submarket recorded the largest volume of positive absorption in the state’s Class A market. Leases involving Arthur J. Gallagher & Co, Cisco Systems, Langan Engineering and Securitas Security Services pulled Parsippany’s Class A vacancy rate to 27.3 percent after ranging near 30.0 percent for the past two years. Competitive rental rates, combined with the submarket’s proximity to several major highways, contributed to the recent uptick in demand.
“A lack of sustained job growth has kept much of the Northern and Central New Jersey office market in neutral,” said Robert Kossar, Executive Managing Director and Market Director for JLL’s New Jersey operations. “Although the state benefitted from the addition of 6,200 jobs in February, the professional/business and financial services sectors collectively shed 3,000 jobs. We don’t expect to see the New Jersey office market kick into high gear until these vital sectors demonstrate accelerating employment gains.”
The Northern and Central New Jersey office market posted approximately 2.0 million square feet in leases in the first quarter of the year, compared with 2.4 million square feet in transactions in the previous quarter. Although the banking/financial services sector was responsible for most of the leasing velocity witnessed in the second half of 2014, professional/business services companies stepped up to the plate in early 2015, despite headwinds in the labor market. The professional/business services sector accounted for 40.0 percent of total transactions in the first quarter of 2015, following by banking/financial services companies, which accounted for 30.0 percent of completed leases.
Approximately 901,200 square feet of new construction was underway in the Northern and Central New Jersey office market in early 2015, compared to nearly 1.7 million square feet in development one year ago. The only speculative project under construction consisted of a 32,500-square-foot building at 466 Springfield Avenue in Summit.
Highlights of the first quarter of 2015 include:
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JLL is a leader in the northern/central New Jersey commercial real estate market, with nearly 800 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. JLL’s New Jersey operations were honored by NJBiz magazine as one of its 2015 Best Places to Work 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 $4.7 billion and gross revenue of $5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has $53.6 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.
George Shea, Mark Faris