While a new 10-story office tower in Metropark is completely leased after nine months on the market, a broker representing the building's landlord said properties in the area still struggle to secure tenants, and average asking rents for class A space are too low to jumpstart proposed development projects in the complex, located in the Iselin section of Woodbridge.
"We now have three prime Metropark sites controlled by different developers, none of which are willing to build on speculation," said Kevin Carton, a member of Cushman & Wakefield's Edison team involved in leasing MetroTop Plaza II. "To build a new building and cover the engineering costs and parking construction, they need rental rates at $40 per square foot, and right now, Metropark class A buildings are going for $32 per square foot."
Carton said asking rents for properties along the Hudson waterfront have hit the $40 per square foot mark, signaling developers to break ground on new projects in that submarket. Though Metropark office properties provide immediate access to trains and highways, Carton said "being that much further from New York, I don't know if Metropark would ever compete with the waterfront, dollar for dollar," noting only significant employment growth could drive demand for space in the area and encourage landlords to raise rents.
According to Carton, unlike office space in other parts of Middlesex County and the state, the Metropark submarket's rental rates have not dropped since the start of the recession. Instead, property owners have increased rental concessions to hold rates at $32 per square foot — a method MetroTop owner Atlantic Realty and Development Corp. used to quickly secure new tenants over properties formerly occupied by BASF and Siemens.
"When your building is 100 percent empty, you do everything to fight and get a tenant," Carton said. "Having competing high-end buildings fighting for new tenants in the same area is very difficult, so you try to best meet tenants' economic situation by offering them free rent and large improvements. You don't see those concessions in the Princeton or waterfront submarkets, but Atlantic really wanted to be ahead of the curve in the area and get the building leased. You figure you want to do everything you can to lease it up now, because you don't want to be in the same position a year from now."
With MetroTop Plaza II's 255,000 square feet of space fully occupied by EisnerAmper, Hatch Mott MacDonald, Ansell Healthcare, Vitech Systems Group and McDonald's Corp., Carton said Atlantic will have enough leverage to cut back on concessions and raise rental rates for future tenants, even if competing properties still have vacant space to offer.
"The three magic words in real estate used to be location, location, location. Now, they are location, connectivity, efficiency," Carton said. "Demand for this building has clearly been driven by the new product, its access to transportation and its almost column-free floor plan, which allows tenants to put more people in less space, reducing the occupancy cost per employee. Based on the typical length of vacancy in the area, though, it did lease up quicker than we expected."
Carton, who brokered the building with Paul Giannone and Eric Sobel, said MetroTop Plaza II is within walking distance of the Metropark train station and includes a 10,000-square-foot event center and an 8,500-square-foot cafeteria for tenants.