By Joshua Burd
Commercial real estate in New Jersey continues to draw investors and tenants at a robust pace, despite economic uncertainty, with even less-heralded asset classes such as office and retail showing signs of health in recent months.
Those are among the findings of NAI DiLeo-Bram & Co.’s Fall 2022 Market Review, which cited the state’s low unemployment rate and an economy that is the seventh-largest in the nation, making it “a central lifeline for goods and services.” That points to continued strength for the region’s industrial property sector, where net asking rents in the season rose nearly 18 percent year over year to $12.51 per square foot, with even sharper growth for higher-end buildings.
It also bodes well for the state’s office market, with return-to-work initiatives fueling a nearly 30 percent uptick in transactions from a year earlier, according to the report, which covers Middlesex, Somerset, Union, Essex and Morris counties. In the retail sector, overall rental rates are relatively stable, at $20.61 per square foot, while rates for Class B space have been on the rise for four years.
“Despite vacancy rates inching up and leasing velocity slowing, demand for space in New Jersey remains high,” the Woodbridge-based firm wrote in the report. “This is unique to the New Jersey market and highlights why despite a shaky economy and an inevitable slowdown looming — the sky is not falling.”
The report, which showed a mixed picture in some areas of the market, offered several other takeaways:
Since fall 2021, the market has expanded by 6.5 million square feet of new Class A product. Despite the additional space, there is a limited supply of high-end industrial properties, as evidenced by a vacancy rate of 2.9 percent and net absorption totaling 6.54 million square feet.
Despite 1 million square feet of space givebacks in fall 2022, there are some positive indicators, with no additional office space under construction, an uptick in new tenants entering the market, current infrastructure investments and strong gross absorption. The demand for Class A office space remains resilient, with over 2.5 million square feet of space absorbed in fall 2022 and more than 4.76 million square feet absorbed since fall 2021.
Net absorption continues to fluctuate and remains negative, but gross absorption in 2022 is more than 2.6 million square feet, indicating the market has healthy activity and tenants are likely seeking out new or different locations in the post-pandemic era.
The Market Review also highlighted the top leases of the fall in each asset class:
- Industrial: 844,373 square feet by List Logistics at 703 Bartley Chester Road in Flanders
- Office: 212,535 square feet (renewal) by Avis Budget Group Inc. at Parsippany Corporate Center in Parsippany
- Retail: 44,215 square feet by Macy’s Furniture at 350 Route 22 West in Springfield