N.J. office market ends 2012 flat after year of fluctuation
After a year of fluctuation and uncertainty, the Northern and Central New Jersey office market ended 2012 nearly right where it started, according to a new report by Jones Lang LaSalle.
The total amount of occupied space in the region grew by a mere 10,345 square feet last year, the brokerage firm found in its fourth-quarter market study. That number is effectively flat “when you’re dealing with 150 million square feet of space” across the market, said Jonathan Meisel, a JLL broker and former market director in New Jersey.
“The good news is we really didn’t lose any significant ground,” Meisel said, noting that 2012 had the lowest leasing volume in six years. “But some might say not gaining any ground is losing ground.”
The market added 223,630 square feet of occupied space during the fourth quarter, recouping some of the nearly 1 million square feet that was lost in the previous three months, the report said. The earlier losses were fueled by a surge in new availabilities between July and September, wiping out nearly 780,000 square feet of space that was added during the first half of 2012.
Meisel said fourth-quarter activity was hampered by uncertainty over federal policy and Superstorm Sandy, which struck the region Oct. 29. The timing cut directly into what is typically “the two most productive weeks of the year,” he said.
“Based on all of that, I believe most of us in the industry are somewhat positive about (2013),” Meisel said. “It’s going to take us a little while for us to get some traction … but leases are constantly evolving and running out. And when you have very limited leasing activity, it’s just the nature of the business to be followed by increased activity.”
The market ended the year with a 25.5 percent vacancy rate, up from just below 25 percent in 2011, the report found. Notable transactions included Biomet Spine and Bone Healing Technologies’ lease of 103,000 square feet at 399 Jefferson Road, in Parsippany, and EMC Corp. leasing 81,700 square feet at 184 Liberty Corner Road, in Warren.
Despite the uncertainty, Woodbridge-based Bergman Real Estate Group last week reported a successful 2012 for its New Jersey office portfolio. John G. Osborne, the firm’s executive director of leasing and marketing, attributed the results to making its space “economically competitive,” maintaining good relationship with brokers and tenants and reinvesting in its properties.
Bergman leased 240,246 square feet of space in 2012, and Osborne said 15 of its 16 buildings in Northern and Central New Jersey ended the year with at least 85 percent occupancy. Still, he acknowledged the current economic climate has remained a challenge.
“The business world seems to have changed overall, and it’s not just in leasing our office buildings,” Osborne said. “But when you talk to your friends and you talk to the business community at large, it seems that most people are having a harder time getting their business completed or getting through their typical week.”
To illustrate the “status quo approach” of many office users, the JLL report noted that about 43 percent of office transactions in 2011 and 2012 have involved renewals or lease extensions. Meisel said that number is typically in the 30 percent range.
Last year also was marked by consolidations and a flight to efficiency, with tenants looking to downsize space even if they’re not shedding employees, Meisel said.