Report: Economic weakness continues to take its toll on N.J. office market
Weak leasing activity failed to offset large blocks of space that hit New Jersey's office market in the third quarter, wiping out the modest gains made in the first half of the year, according to a new market report by Jones Lang LaSalle.
The firm recorded a drop of nearly 1 million square feet in the total amount of occupied space in the state's northern and central regions, where some large companies are preparing to leave their spaces for new buildings. That means year-to-date totals are now about 213,000 square feet below 2011, as high unemployment persists and other firms remain reluctant to expand.
"It wouldn't have been a negative-territory scenario if we would have maintained some absorption, in terms of positive demand, to counter the blocks of space that came onto the market," said Stephen Jenco, JLL's director of suburban tristate research. "But unfortunately, supply won out over demand during the third quarter."
The last three months saw SHI International Corp., an IT solutions firm, place 180,000 square feet of vacant space on the market in Franklin's Somerset section, the report said. Meantime, pharmaceutical firm Novartis and manufacturer Church & Dwight are preparing to vacate a combined 260,000 square feet of space in Florham Park and Princeton, respectively, as they prepare to move into new facilities.
The three firms accounted for 45 percent of the total space that hit the market in the third quarter, JLL found. That helped drive a 0.6 percent increase in the region's vacancy rate, to 25.6 percent, marking the sharpest quarter-over-quarter jump since 2009.
Through the first half of the year, the market had recorded about 779,000 square feet of positive absorption, Jenco said. But that was erased over the past three months, thanks in part to issues like tepid job growth, uncertainty over the national elections and concerns about global markets.
"We have factors that that our beyond our control," he said. "Obviously the economy is high up on the list, but it's almost like you can pick what type of factor or what type of event has really got us stuck in neutral."
One of the few bright spots in the third quarter was leasing at Metrotop Plaza II, a new building in the Metropark section of Woodbridge. The 10-story tower, which opened late last year, reached full capacity in the quarter through deals with Eisner Amper and Hatch Mott MacDonald. The firms leased 87,000 and 81,000 square feet, respectively, according to JLL's report.