According to CBRE’s Q3 2018 office market report, the New Jersey commercial office real estate market picked up where it left off during the previous quarter: new leasing activity of approximately 1.8 million sq. ft. was the second-highest third quarter recorded since 2012 and a year-over-year improvement of 30.8 percent. Overall, third quarter velocity of 2.6 million sq. ft. (new leases and renewals) was the highest since the first quarter of 2017. Pharmaceutical, life sciences firms and innovation economy companies were the big drivers of this robust activity, comprising 10 of the top 20 third quarter leases.
In a deal arranged by CBRE, Teva Pharmaceuticals’ 345,000-sq.-ft. lease in Parsippany, which will bring the company from Pennsylvania to New Jersey and serve as its new U.S. headquarters, was the largest commitment during the third quarter.
As a result of the strong leasing activity, net absorption reached nearly one million sq. ft., the highest level the market has seen since 2016 and a significant turnaround from the second quarter, which saw 193,000 sq. ft. of negative absorption. Most of the increase occurred in Northern New Jersey, which recorded 900,000 sq. ft. of net absorption for the quarter, the largest third quarter total since 2006. The strong performance, riding the 345,000-sq.-ft. Teva lease and a 22,000-sq.-ft. lease by Reckitt Benckiser, propelled the Parsippany submarket to a total of 403,000 sq. ft. of positive absorption. In addition, the Waterfront submarket, bolstered by E*Trade’s 132,000-sq.-ft. renewal and expansion at Harborside in Jersey City and Wal-Mart Digital’s 42,000-sq.-ft. lease in Hoboken, tallied more than 150,000 sq. ft. of positive net absorption.
“New Jersey continued its rebound which began during the second quarter, with life sciences firms playing a major role in the market’s overall leasing activity,” said Joseph Sarno, Jr., Executive Vice President, CBRE. “As a result of this robust leasing, the availability rate fell by 70 basis points quarter-over-quarter to 20.5 percent, its lowest rate in the past four quarters. This is a trend we expect will continue through the end of the year.”
The average asking rent ended the quarter at $26.34 per sq.ft., $0.13 per sq.ft. lower than the second quarter, but $0.37 per sq. ft. above the $25.97 per sq. ft. posted in the third quarter of last year. Notably, the average asking rent in the Waterfront submarket reached a new high of $43.69 per sq. ft., the seventh consecutive quarter to see an increase.
On the investment sales front, New Jersey mirrored the second quarter’s activity. The market saw 12 sales transactions during the third quarter divided evenly between Northern and Central New Jersey. However, due to the sale of Park 80 West, Plaza II in Saddle Brook for $226 million, total square footage, total sales volume and average sale price were all up sharply compared to the second quarter.
To view the full report, click here.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2017 revenue). The company has more than 80,000 employees (excluding affiliates) and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
