Report: South Jersey office market sees improvement
Leasing and sales activity in the southern New Jersey office market improved in the second quarter of 2012 compared to the same period last year, though positive absorption is still minimal and vacancy is on par with the rest of the state, according to a quarterly report by Voorhees-based Wolf Commercial Real Estate LLC.
Commercial real estate activity had the highest concentration in Moorestown, Marlton and Mount Laurel, while the western part of the region hosted a large share of the market's vacancies — pushing the office vacancy rate close to 20 percent in the second quarter of the year, the report said.
But according to Jason Wolf, founder and principal of the firm, compared to the same quarter of the previous year, average rental rates for class A and B office space have increased, from the range of $8 to $10 per square foot, to $10 to $14 per square foot, and leasing activity in both renewals and new deals expanded, from 300,000 square feet to 450,000 square feet.
"In the last few years, larger REIT owners controlled office space and were doing below-market deals that were killing the market. Now, a new band of local owners are rebuilding the office market and getting rents back to where they were historically, creating a competitive landscape," Wolf said. "The new office owners have shown they are not 'giving away the house,' and are focused on investing back into their buildings to retain existing tenants and attract new ones."
Wolf said growth in the health care and financial industries drove improvement in South Jersey's commercial market, as Cooper University Hospital, Lourdes Health System, Virtua and The Rothman Institute continue to seek out highly visible office space for care centers and outpatient facilities, and mortgage firms like TRG Customer Solutions and Freedom Mortgage show interest in small, single-story office parks.
"We're seeing smaller businesses spending more money and leasing 5,000 square feet of space or less, and larger corporate companies are making longer term commitments on their leases compared to five years ago," Wolf said. "Because businesses are becoming more confident in their future outlook, we're starting to see slow absorption. We have a long, long road to go, but the indicators are becoming more positive."