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News release

EAST RUTHERFORD

Surging Class A Demand Pulls Northern, Central New Jersey Vacancy Rates Lower

More than 80.0 percent of 1.5 million square feet in positive net absorption during third quarter of 2016 concentrated in Class A market


EAST RUTHERFORD, N.J., October 13, 2016 — Following a sluggish first half of the year that was defined by 235,610 square feet of negative net absorption, a rebound in leasing velocity led to more than 1.5 million square feet of positive net absorption in the Northern and Central New Jersey office markets during the third quarter. The overall vacancy rate subsequently declined from 24.4 percent at mid-year to 24.0 percent in the third quarter—its  lowest level since early 2009.

More than 80.0 percent of the 1.5 million square feet absorbed in the third quarter was recorded in the state's Class A office market as companies sought this high-end space for their operations. The Class A vacancy rate retreated 30 basis points from mid-2016 to 24.1 percent.

"Information and technology clients have ramped up their presence in the Northern and Central New Jersey office markets," said Jonathan Meisel, Managing Director with JLL. "While banking, financial services sectors and  pharmaceutical and life sciences industries have historically accounted for a large portion of office demand, information and technology sectors made up nearly one-third of leasing activity during the third quarter of 2016, compared with less than 10.0 percent of transactions one year ago."

Contributing to the latest uptick in deal volume, iCIMS, Inc. signed for 350,000 square feet at the mixed-use development Bell Works site in Holmdel; while iconectiv took 115,000 square feet at Somerset Corporate Center Blvd. in Bridgewater. Proximity to Manhattan and a skilled workforce, replenished by graduates from the state's universities, are expected to keep New Jersey on the radar of growing high-tech companies.

"While demand for Class A space in mass-transit oriented submarkets had previously generated headlines, suburban-centric markets garnered the recent spotlight as submarkets including the Interstate 287, Monmouth County and Route 24 each posted more than 200,000 square feet of positive absorption in the third quarter," said Stephen Jenco, Vice President, Suburban Tri-State Research with JLL. "Competitive rental rates fostered this flight-to-quality migration."

Approximately 170,445 square feet remained in various phases of construction during the third quarter, including build-to-suit facilities for Zoetis Inc. in Florham Park and Fox Rothschild LLP in Morristown. MetLife's 185,000-square-foot building at 67 Whippany Road in Whippany was recently completed, as was a 130,000-square-foot, build-to-suit Class A building for NRG Energy, Inc. at  804 Carnegie Center in Princeton.

Highlights of the third quarter of 2016 include:

  • Northern and Central New Jersey's overall vacancy rates declined to 24.0 percent in the third quarter, a decrease of 1.6 percent (or 60 basis points) compared to 24.4 percent the previous quarter. The state's overall vacancy rate was 24.6 percent one year ago.
  • The Northern and Central New Jersey Class A average asking rental rates for direct space dropped $0.06 from the previous quarter to $28.04 per square foot. Year over year, the state's Class A rental rate inched less than 1.0 percent higher.
  • With an average asking rental rate of nearly $38.37 per square foot in the third quarter, the Hudson Waterfront continued to maintain the highest Class A rent in the office market. Metropark's asking rental rate above $31.00 per square foot this quarter represented the highest Class A rent in Central New Jersey.
  • With 450,550 square feet of positive net absorption, the Route 24 submarket boasted the largest volume of absorption in the Northern and Central New Jersey Class A office market. Driving this absorption was Allergan Sales's leasing of a 431,495-square-foot office building at 5 Giralda Farms in Madison for its new U.S. headquarters. The Dublin-based pharmaceutical company was recently awarded a 10-year, $58.2 million Grow New Jersey award to consolidate its Bridgewater, Jersey City and Parsippany offices to Madison. The Route 24 Class A vacancy rate plunged six percentage points from mid-2016 to less than 26.0 percent in the third quarter, marking the lowest level in two years.
  • Within Central New Jersey, a combination of leasing and user sales activity collectively fueled 245,200 square feet of positive net absorption in the Interstate 287 submarket during the third quarter. This represented the largest volume of quarterly absorption in this submarket since the fourth quarter of 2014. The Interstate 287 Class A vacancy rate plummeted from nearly 24.0 percent in mid-2016 to 19.0 percent. Contributing to the lower Class A vacancy rate was Sysco Guest Supply LLC's leasing of nearly 71,940 square feet at 300 Davidson Avenue in Somerset. On the sales front, Prinston Pharmaceutical Inc. purchased 700 Atrium Drive in Somerset and will utilize the 183,925-square-foot building for its operations.

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 1,000 professionals and support staff providing agency leasing and property marketing, tenant representation, industrial services, strategic consulting, occupancy planning, workplace strategies, project and development services, property and facility 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 a local service provider for JLL's 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 $5.2 billion and gross revenue of $6.0 billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $59.1 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.