Newark Penn Station is a key stop along the Northeast Corridor rail line .
By Joshua Burd
Suburban office landlords who spruce up their buildings have seen tenants come calling, but continue to trail those offering space in urban locations and those served by mass transit.
The continued gap in both rental rates and vacancy were among the findings in new research by JLL. In an annual report, the firm found that overall asking rental rate in select transit hubs averaged $32.50 per square foot at year-end 2016, compared with $26.02 per square foot in New Jersey’s suburban submarkets.
JLL’s selection of transit hubs includes both urban and suburban locations with access to major rail stations: Summit, Hoboken/Jersey City, Metropark, Princeton, Morristown, Trenton, Newark and New Brunswick. Vacancy in that group of submarkets rose from 16.9 percent at year-end 2015 to 19.2 percent 12 months later, thanks to some large availabilities that hit the market last year along the Hudson waterfront, but those locations are still outperforming the suburbs by a considerable margin.
Namely, JLL found that suburban office markets had overall vacancy of 26.4 percent through 2016.
“Tenants are not just asking for building amenities, they are expecting them,” said Stephen Jenco, JLL’s vice president and director of suburban tri-state research. “Savvy landlords are renovating properties and packing them with amenities to make their product stand out from the competition.
“Tenant enticements have included adding food trucks and high-end fitness centers,” Jenco add. “Look for other building owners to offer perks like subsidized ride-sharing programs, such as Uber and Lyft, to and from downtown areas or train stations.”
This gap in rental rates between the suburban market and overall transit hub market closed slightly in 2016, JLL found, but has remained more than $6.40 per square foot for the past two years.
The firm also noted at least one common theme between transit-served locations and those in traditional suburbs: High-end Class A space remains the product of choice for office tenants. Nearly 85 percent of the leases completed in the state’s office market during 2016 were concentrated in Class A buildings.
As such, Class A average asking rents saw growth in 2016 in both suburban and transit hub submarkets, JLL said. In the suburbs, rents rose to $28.89 from $25.66 in 2015, while rents in transit hubs rose to $37.68 from $35.10.