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News release

EAST RUTHERFORD, NJ

New Jersey’s High-End Buildings Claim Majority of Leasing Activity

Strong leasing pushes Class A vacancy rates below 25 percent in 2nd quarter 2015 for first time since year-end 2013


EAST RUTHERFORD, N.J., August 4, 2015 — The Class A vacancy rate for Northern and Central New Jersey dropped 20 basis points to 24.9 percent in the second quarter of 2015, according to JLL. The drop was fueled by a burst of leasing activity within the state’s high-end office product. This is the first time the Class A vacancy rate has dropped below 25.0 percent since year-end 2013, when a vacancy rate of 24.8 percent was reported.

More than 416,000 square feet of positive net absorption was recorded in Northern and Central New Jersey during the second quarter, compared with 871,100 square feet of negative net absorption three months ago. Approximately 245,200 square feet of that total was concentrated in the Class A office market. Northern New Jersey was the main beneficiary of the positive net absorption, with Central New Jersey reporting just 44,298 square feet of positive net absorption.

After posting more than 286,000 square feet of positive net absorption in the first quarter, additional availabilities in the Parsippany Class A market eroded these gains the second quarter of 2015. Among the largest blocks impacting the Class A office market was a 148,650-square-foot block at 3 Sylvan Way. Dun & Bradstreet is vacating the building after consolidating operations in Short Hills earlier this year. The Parsippany Class A vacancy rate eclipsed 28.0 percent at midyear 2015, from 27.3 percent earlier this year.

“Inconsistent local monthly job growth continued to overshadow the Northern and Central New Jersey office market,” said Robert Kossar, Executive Managing Director and Market Director for JLL’s New Jersey operations. “The education and health services sector registered the largest gain in May, with 2,700 new jobs, followed by professional / business services, with 2,600 new jobs. Despite the recent job gains seen in professional / business services, the sector remained in the red, with 6,300 jobs shed over the course of the past year. The lack of growth in this sector contributed to restraint in the office market’s recovery.”

Slightly more than 2.4 million square feet of leases were signed during the second quarter of 2015 in the Northern and Central New Jersey office market, compared with 2.0 million square feet in the previous quarter. While the professional / business services sector accounted for most of the leasing activity seen in early 2015, the information / technology sector has grabbed the spotlight just three months later. Verizon sold its 1.4 million-square-foot operations complex in Basking Ridge to Mesirow Financial Holdings Inc. for $650.3 million. The telecommunications provider subsequently leased back the entire facility for a 20-year term.

Approximately 346,200 square feet of new construction was underway in the Northern and Central New Jersey office market in early 2015, compared with 914,500 square feet one year ago. Build-to-suit projects comprise about 90 percent of the product under construction. The latest project to break ground was a 185,000-square-foot building in Whippany that will house the new global headquarters for MetLife Investments upon its completion in mid-2016. MetLife will be relocating its operations from 10 Park Avenue in Morristown.

Highlights of the second quarter of 2015 include:
• The Northern and Central New Jersey overall vacancy rate decreased to 25.0 percent from 25.3 percent in the first quarter of the year. The state’s overall vacancy rate has remained within a few percentage points of 25.0 percent for the past two years.
• With an average rental rate of nearly $38.20 per square foot, the Hudson Waterfront maintained the highest Class A rent in the office market. The Metropark submarket’s asking rental rate of $31.97 per square foot represented the highest Class A rent in Central New Jersey.
• Following an uptick in availabilities that boosted the Hudson Waterfront vacancy rate higher during the first quarter, a rebound in demand for Class A space led to more than 228,370 square feet of positive absorption in the Hudson Waterfront submarket this quarter. One of the largest transactions was New York Life Insurance’s lease for 114,000 square feet at 30 Hudson Street in Jersey City. New York Life was awarded $33.9 million in economic incentives to move 325 jobs from Parsippany, while also creating 300 new jobs. The Hudson Waterfront has maintained the lowest Class A vacancy rate in the state since early 2014.

For more news, videos and research resources from JLL, please visit the firm's U.S. media center Web page. Bookmark it here: http://bit.ly/18P2tkv.

JLL is a leader in the northern/central New Jersey commercial real estate market, with more than 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. A Fortune 500 company 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 $56.0 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.