The storm clouds may be lifting from the state’s suburban office submarkets, thanks to rising interest in some transit-centric regions and new signs of life at some of New Jersey’s defunct corporate campuses.
Those are the findings of a new market analysis by Avison Young’s Morristown office, which found “glimmers of hope” in such areas despite flat leasing activity for the first quarter. The real estate brokerage found vacancy in the northern and central New Jersey office market rose slightly to 21.4 percent, from 21.2 percent at the end of 2012.
But executives with the firm pointed to longer-term activity in rail-accessible suburbs like Morristown, Princeton, Summit and the Metropark complex in Iselin’s Woodbridge section — especially those deals involving leases of 20,000 to 30,000 square feet. Such deals have caused vacancy rates to inch downward from early 2011, the firm found, from 27.3 percent to 21.3 percent in Metropark, and from 13.6 percent to 12.9 percent in Morristown.
What’s more, larger users are now interested in those markets, said Jeffrey L. Heller, an Avison Young principal and managing director of its New Jersey office. He said he recently met with a Fortune 500 company that needs about 150,000 square feet of space, though the tenant found that it had to expand its search.
“They specifically asked about Morristown — is there a building, is there a pad that can accommodate us?” Heller said. “And the unfortunate answer is ‘not now.’ ”
Those space limitations have caused such tenants to consider markets like Florham Park, Metropark or other “suburban locations that are proximate, but not walking distance,” to mass transit, the firm’s analysts said.
“You saw larger deals in Metropark because they may not necessarily have some of the walkable stores and such, but with the rail there … they were able to develop a new building and get a lot of leasing out there,” said Matthew Dolly, Avison Young’s vice president of research in New Jersey. He was referring to MetroTop Plaza II, the submarket’s newest office tower, which filled much of its space last year.
The activity comes amid progress at some of New Jersey’s largest vacant corporate campuses, the firm noted. After several years of discussions, local officials in Holmdel recently named Somerset Development redeveloper of the 473-acre former Bell Labs property.
Avison Young also pointed to Honeywell International’s recent decision to move its global headquarters to Morris Plains, to vacant properties owned by Johnson & Johnson’s McNeil-PPC subsidiary. That means the company will leave behind its longtime headquarters in Morris Township, but the site is being eyed for redevelopment.
“With some of these larger elephants, maybe they’re not white elephants anymore,” Heller said of the redevelopment and reuse opportunities. “They’re elephants with a different color.”
Dolly also noted that suburban locations have recouped some interest thanks to changes in state incentive programs, which previously steered development toward cities. More changes could be in store, he said, as the Legislature works on bills to overhaul those programs.
“That’s something to pay attention to,” Dolly said.