Newmark Knight Frank (NKF) has just issued a 4Q New Jersey Office Trends report providing strong evidence that popular renovation programs are paying off for landlords. The analysis shows significantly stronger absorption as well as steep availability declines at renovated properties.
NKF Research Manager Mark Russo reports that more than one quarter of the office inventory in Northern and Central New Jersey has been renovated since 2014, which is helping to attract tenants and bolster rents.Recently upgraded assets have tallied 3.4 million square feet of positive net absorption over the past five years, while net absorption has been negative for assets that were not renovated. Asking rents at renovated properties were found to be somewhat higher; however, the largest benefit for landlords is that they stay wellleased. The availability rate at upgraded buildings has declined by 9.5% over the past five years, while it has increased by 2.2% among properties that were not improved.
“Highly amenitized and modern spaces show well to prospective tenants and competeeasily against outdated facilities,” said Jamie Drummond, NKF Senior Managing Director.
Nearly half of the new leasing activity year-to-date has taken place at upgraded buildings.This includes 400 Interpace Parkway in Parsippany, where Teva Pharmaceuticals took 345,488 square feet. The property, known as MCCBLUE, had undergone a capital improvement program that included adding a new fitness center, atrium and cafeteria as well as making mechanical upgrades.Other notable recent relocations incentivized by renovation include Insmed’s lease for 117,000 square feet at 700 Route 202/206 in Bridgewater and Plymouth Rock’s 129,600 square-foot tenancy at 581 Main Street in Woodbridge.
Leasing activity at upgraded buildings is set to keep pace, as 11.7 million square feet of additional renovation projects are either currently underway or scheduled to commence soon. One prominent example is Morris Corporate Center IV in Parsippany, which is being rebranded as LATITUDE. Upon completion, the property will feature dining and fitness options, courtyards and a new glass atrium joining the east and west buildings that will feature a bicoastal theme.
“As core components such as fitness centers, cafeterias and lobby updates become increasingly common, landlords will need to expand their amenity offerings to stay competitive,” said Russo. “Tenants, meanwhile, can take advantage of the abundance of updated properties and find amenity-rich spaces that allow them to attract and keep talented employees.”
About Newmark Knight Frank
Newmark Knight Frank, operated by Newmark Group, Inc. (NASDAQ: NMRK), is one of the world's leading and most trusted commercial real estate advisory firms, offering a complete suite of services and products for both owners and occupiers. Together with London-based partner Knight Frank and independently-owned offices, NKF's 16,000 professionals operate from approximately 430 offices on six continents. NKF’s investor/owner services and products include investment sales, agency leasing, property management, valuation and advisory, diligence, underwriting, government-sponsored enterprise lending, loan servicing, debt and structured finance and loan sales. Occupier services and products include tenant representation, real estate management technology systems, workplace and occupancy strategy, global corporate services consulting, project management, lease administration and facilities management. For further information, visit www.ngkf.com. Newmark Group is a publicly traded subsidiary of BGC Partners, Inc. (NASDAQ: BGCP), a leading global brokerage company servicing the financial and real estate markets.
