55 Corporate Drive in Bridgewater — File photo/Courtesy: CBRE
By Joshua Burd
The rate of available office space in New Jersey ticked upward in the first quarter, thanks to several large blocks hitting the market and what brokerage firms say was modest leasing activity.
A report by CBRE tracked 192,000 square feet of negative absorption or a decrease in overall occupied space during Q1, pushing availability up by 20 basis points to 24.5 percent. Separate research by Savills found that the rate increased to 25.9 percent, citing the impact of 674,325 square feet hitting market at Sanofi’s soon-to-be-former campus at 55 Corporate Drive in Bridgewater, as well as 328,966 square feet that Merrill Lynch is vacating at 101 Hudson St. in Jersey City.
Both reports noted the continued dominance of top-tier, highly amenitized buildings, along with the importance of redevelopment projects that are paring the inventory of defunct office space in northern and central New Jersey. Yet Q1 suffered from a lack of new leases by large tenants, among other headwinds.
CBRE found that leasing activity during the quarter fell to 1.1 million square feet, down 26 percent from the prior quarter and 9 percent below the five-year average.
“After contributing nearly 32 percent of all leasing activity in the second half of the year, large leases of 100,000 square feet or greater accounted for only 17 percent of Q1’s total,” CBRE, which counts renewals separately, wrote in its market report. “The share of Class A leasing pulled back to only 78 percent of all leasing activity in Q1, well behind the average 85 percent share of the annual volume in 2023-2024.”
According to the report, the availability rate for top-tier buildings in Q1 was 19.5 percent or five percentage points lower than the overall market. Those properties continued to outperform, CBRE said, accounting for 17 percent of leases during the quarter despite representing just 9 percent of the total market size.
Savills, which tracks renewals, identified 1.9 million square feet of leasing activity from January through March, marking a 27.3 percent increase from Q4 but a 4.4 percent decline from one year ago. Financial services, retail and so-called TAMI tenants — short for technology, advertising media and information — drove 62.6 percent of leasing volume.
“Of note, the largest deals in the financial and retail sectors were renewals,” Savills wrote in its Q1 report, pointing to BlackRock’s 175,909-square-foot deal at 1 University Square Drive in the Princeton market and Tapestry’s 105,527-square-foot extension at 5901 West Side Ave. in North Bergen.
A report by Cushman & Wakefield found similar demand for the quarter, which it called notable given that only one new lease exceeded 100,000 square feet. Instead, midsize deals such as Aegis Insurance’s move to 55,088 square feet in Jersey City and Acrisure’s 44,791-square-foot commitment in Parsippany drove transaction volume to start the year.
“Tenants continue to prioritize high-quality office space that meets modern workplace demands,” said Felix Soto, a senior research analyst with Cushman’s New Jersey team. “The stabilization in vacancy rates and steady leasing activity indicate that well-capitalized properties with strong ownership remain competitive in the current market.”
