By Joshua Burd
Smaller-sized leases continued to dominate New Jersey’s office market as 2019 came to a close, putting a drag on overall deal volume as larger transactions remained elusive.
New year-end market reports said as much, with JLL noting that more than half of the deals completed during 2019 were in the 10,000-square-foot to 25,000-square-foot range. Meantime, the firm found that less than 10 percent of leases were greater than 100,000 square feet, typically the size needed to put a significant dent in the vacancy rate.
JLL also noted that the largest Q4 office transaction in the market was a renewal, by BNY Pershing, for 400,000 square feet at 95 Christopher Columbus Drive in Jersey City. Additionally, the firm highlighted transactions such as Promotion in Motion’s 110,950-square-foot lease at 225 Brae Blvd. in Park Ridge, the former headquarters of Hertz Corp.
And while office users continued to seek opportunities to upgrade their space — encouraging landlords to renovate their properties — overall office vacancy in the region inched higher from the third quarter to 23 percent in the wake of diminished leasing activity.
“After remaining unchanged for the past six months at 22.9 percent, the Northern and Central New Jersey overall office vacancy rate drifted upward to 23.0 percent during the fourth quarter, as diminished leasing velocity overshadowed the office market,” JLL wrote in its report. “The overall vacancy rate stood just 40 basis points lower from year-end 2018.
“Less than 1.7 million square feet of transactions were signed during the final three months of 2019, which brought the year’s leasing volume to 7.9 million square feet. This figure was a 23.0 percent decline in activity from 2018.”
A separate report by Transwestern noted that Q4 marked the end of a strong long-term recovery after a tumultuous start to the decade. The market recorded nearly 10 million square feet of positive absorption during the final seven years of the 2010s, the firm found, following what had been more than 5 million square feet of occupancy losses over five years starting in 2008.
Transwestern also pointed to overall positive net absorption in 2019 despite a slight setback during the fourth quarter. Solid occupancy growth was spread throughout the state, with Morris County leading northern New Jersey in total leases signed during Q4, thanks to a host of deals between 15,000 square feet and 35,000 square feet in Parsippany.
Meanwhile, Middlesex County led central New Jersey with increased transaction volume in the Woodbridge and Metropark submarket.
“While past expansions were centered around new construction, this was the decade of redevelopment, with limited new product and essentially no threat of overbuilding,” said Matt McDonough, a managing director based in Transwestern’s Florham Park office. “Office investors and landlords gained tremendous success through value-add opportunities, upgrading well-located and outdated product, while adding amenities to create a more hospitable environment for today’s office tenants and their employees.”