The health care and life science industries have proved vital to New Jersey's office market in recent months, driving leasing and sales activity to help vacancy inch downward in the second quarter, according to new market research by Avison Young.
The firm's Morristown office found five of the top six lease transactions during the period came from the two sectors, including large deals in northern New Jersey by users like Spectra Laboratories and Pfizer. Also during the quarter, new owners took hold of sites like the 287,000-square-foot former Lucent Technologies facility in Middletown, which Memorial Sloane-Kettering will convert into a cancer treatment center.
The interest from health care and life science users has picked up in recent quarters, said Jeffrey Heller, an Avison Young principal and its managing director in New Jersey.
"I don't know if we're at a crescendo yet," he said. "But it's really where the high level of activity is coming from in the marketplace — not only from an occupier perspective, but an investor or ownership repositioning perspective."
Meantime, the brokerage has seen rising interest from clients like urgent care groups, dialysis centers and sports medicine practices, Heller said. Such tenants have smaller requirements, but the demand is quickly accumulating.
"It seems like there's a need for that type of space," Heller said. "They're either going to existing medical office buildings, in which space is tight, or investors are now converting some of their obsolete office-type properties to medical."
But larger users also are on the hunt: Heller said Valeant Pharmaceuticals International Inc. is in the market for between 150,000 and 200,000 square feet. And in May, Valeant said it had acquired eye care company Bausch & Lomb Holdings, which will move from Madison to a subleased, 90,000-square-foot space in Warren.
Office vacancy in northern and central New Jersey fell slightly last quarter to 21 percent, from 21.4 percent, Avison Young found in its analysis. That was due in part to 676,000-square-foot increase in total occupied space, which helped offset several corporate consolidations that continue to hurt the market.
Matthew Dolly, Avison Young's vice president of research in New Jersey, said health care and life sciences likely will help erase additional office vacancy as populations continue to age in the state and across the country. He added that uncertainty over last fall's presidential election and the future of the Affordable Care Act may have caused some hesitation until recently.
"People were holding back, but now it looks like the deals are coming to fruition," Dolly said. Also of note during the quarter was Summit Medical Group's deal to occupy a 100,000-square-foot space in Florham Park, to be built by the Rockefeller Group
Reporter Joshua Burd is @JoshBurdNJ on Twitter.
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