By Joshua Burd
Office leasing in northern and central New Jersey slowed in the third quarter, a report by CBRE found, as tenants grappled with economic headwinds despite some bright spots in the market.
According to the real estate services firm, leasing activity in the region totaled 839,000 square feet from July through September, much of it driven by demand in North Jersey. That was down 44 percent from the second quarter and 32 percent below the five-year quarterly average, as the availability rate rose 20 basis points to 25 percent.
On a positive note, CBRE said renewals spiked by 60 percent from Q2 for a total of 434,000 square feet, bringing the year-to-date total to 1.25 million square feet. Meantime, the average asking rent of $31.77 per square foot is up 5 percent from the same time last year.
“Economic uncertainty continues to have an impact on the office leasing market,” said Matthew Saker, a senior vice president with CBRE. “Bright spots do exist, with robust renewal activity and a flight-to-quality for new commitments, as well as improved sublet leasing volume with tenants reoccupying sublease space that resulted in a 3.2 percent quarterly decline in available sublease space.
“Also, the market’s average asking rent has remained steady despite the challenges. We anticipate the same scenario to continue through the end of the year, with glimmers of light starting to peak through early 2024.”
Leasing in North Jersey totaled 573,000 square feet in Q3, the report found, thanks in part to an uptick in the slumping Hudson waterfront. Tenants leased 118,000 square feet in the submarket during that time — a quarter-over-quarter jump of 88 percent — driven by Hain Celestial Group’s 40,000-square-foot sublease at 221 River St. in Hoboken and International AIDS Vaccine Initiative’s 30,000-square-foot commitment at 95 Greene St. in Jersey City.
In contrast, Central Jersey recorded a 57 percent drop from Q2, as tenants took just 266,000 square feet during the third quarter, CBRE said. Princeton was a rare bright spot with 93,000 square feet of demand — 29 percent above the five-year quarterly average, including a 53,000-square-foot commitment by Dr. Reddy’s Laboratories at 600 College Road East in Plainsboro.
The report also noted that, despite the slowdown, tenants’ preference for quality space remained as Class A leasing activity accounted for 77 percent of the quarter’s total. It added that sublease activity rose 11 percent quarter over quarter to 183,000 square feet, including Stephen Gould Corp.’s 40,000-square-foot commitment at 5 Giralda Farms in Madison.
