By Joshua Burd
A growing number of tenants are searching for office space in New Jersey, providing a reason for optimism even as vacancy continued to climb heading into the summer.
Those are among the findings of a second-quarter market report by JLL, which tracked nearly 4.5 million square feet of tenant requirements in northern and central New Jersey at midyear. That represented a roughly 10 percent increase from the end of 2020, while completed leasing activity also ticked up during the second quarter, to some 1.9 million square feet.
The improvement helped balance other indicators in the report, which centered largely on the pandemic’s continued impact on the state’s office sector.
“With many companies putting their long-term real estate decisions on the backburner during the COVID-19 pandemic, increased vaccination rates and lifting of occupancy restrictions are helping set the stage for pent-up demand to gain traction during the second half of the year,” JLL’s Stephen Jenco wrote in the firm’s latest New Jersey Office Insight report.
Until then, the state figures to grapple with the ongoing effects of COVID-19 and the prospect that many employees will continue to work remotely. The report found that sublease space in northern and central New Jersey is now at its highest level since year-end 2003, reaching 7.7 million square feet, thanks to consolidations, restructurings and the introduction of large blocks by well-known corporations.
Some of the largest new availabilities came from the pharmaceutical industry, JLL said, including 215,000 square feet that was put on the market by Abbvie at 5 Giralda Farms in Madison. The report also pointed to 118,000 square feet that Eisai Inc. is now marketing at 155 Tice Blvd. in Woodcliff Lake, having relocated its headquarters to the ON3 campus in Nutley.
Still, sublease space accounted for just over 18 percent of total available office space in the market, Jenco wrote, noting that it’s well below a high-water mark of 40 percent in 2002. Overall vacancy rate in the region climbed to 27.3 percent in Q2, up from 26.4 percent in early 2021.
The report also found that the 1.9 million square feet of leasing activity during the spring was the highest volume seen since the third quarter of 2020. The health care industry was largely responsible for the boost, accounting for nearly 60 percent of leasing velocity during the quarter thanks to deals such as Atlantic Health System’s 533,000-square-foot extension and expansion at 435, 465 and 475 South St. in Morristown.