While small-sized deals were the bulk of the 2017 office market activity, JLL reported a 45 percent decline in activity year-over-year. And while 7.1 million square feet of office space were leased for the year, only 500,000 square feet of Class A space were absorbed in 2017.
“A slight uptick in demand pulled the northern and central New Jersey overall office vacancy rate down to 24.1 percent at year-end 2017 compared to 24.5 percent in the third quarter,” JLL said in its Q4 2017 New Jersey Office Insight. “Despite this decline, the vacancy rate was only 40 basis points lower from a year ago.
“After posting nearly 914,960 square feet of negative net absorption during the first quarter, additional tenant requirements translated into positive absorption figures for the next three quarters, including more than 606,500 square feet in the fourth quarter of 2017. This activity led to 957,700 square feet being absorbed in the office market during 2017, which nearly doubled the absorption witnessed in 2016.”
JLL listed Mars Wrigley Confectionery’s plans for 110,000 square feet at Ironside Newark as one of the largest office deals of the year, although the transaction has not yet closed. The firm expects Quest Diagnostics and Ralph Lauren’s economic incentives to Prim Capital’s ON3 — the former Roche Campus in Clifton and Nutley — to have a positive impact on the northern New Jersey office market.
Colliers International also listed Societe Generale’s lease at 480 Washington, Jersey City, for 108,574 square feet; Movado Group’s lease for 90,050 square feet at 650 From Road, Paramus; and Altice USA’s commitments for 64,125 square feet and 60,994 square feet in Piscataway and Oakland as significant office transactions.
“With the northern and central New Jersey overall vacancy rate ranging below 25 percent for the past six years, the demolition or conversion of older, vacant office buildings to alternative uses will accelerate in the coming year,” JLL said. “More than 400,000 square feet was removed from the state’s office inventory in 2017. An additional 1 million square feet is expected to be redeveloped in 2018, with a majority of these projects involving outdated office buildings in Bergen and Morris counties. The removal of these buildings will help to exert downward pressures on the state’s vacancy rate.”