115 Tabor Road in Morris Plains
By Joshua Burd
The state’s office market took modest steps toward a recovery in the third quarter, as the pace of new listings slowed and as renewals helped sustain leasing activity in many locations.
That’s according to new research by Colliers International, which found that roughly 22.6 percent of office space in northern and central New Jersey was available as of Oct. 1, which was flat from the previous quarter. The net change in occupied space remained negative during Q3, but recorded its highest total since late 2019, thanks to both timely leases and some space being pulled off the market.
The report also noted that only eight blocks of space greater than 50,000 square feet hit the market during June, July and August, down from 16 in the second quarter and 14 in the first quarter.
“The anticipated post-Labor Day return to the office was disrupted by the Delta variant as many companies pushed their target days further out or left them undecided,” Colliers wrote. “While this has delayed the re-population of office buildings as flexible work from home programs resume, New Jersey’s office market exhibited early signs of a recovery during the third quarter.”
The report pointed to muted overall leasing activity, tracking 1.5 million square feet of transaction volume during Q3. That figure was down 29.4 percent from its three-year quarterly average.
“As occupiers are planning their future space needs carefully, the timeline for new lease transactions has grown,” the firm wrote. “This dynamic has resulted in renewals accounting for a higher proportion of the total leasing volume, as decisions are delayed, and tenants opt to stay in place.”
To that end, renewals accounted for 42.5 percent of the total leasing activity year to date, Colliers said, up from an average of 25 percent prior to the pandemic. UnitedHealth Group inked the largest renewal of Q3 when it extended its 64,753-square-foot lease at 131 Morristown Road in Basking Ridge, while Spencer Savings Bank also opted to maintain its 41,499-square-foot space at 611 River Drive in Elmwood Park.
While far less common, new deals included Cigna Corp.’s 196,693-square-foot lease at 115 Tabor Road in Morris Plains, the site of the former Honeywell International headquarters. Colliers also pointed to a 99,016-square-foot expansion at 30 Knightsbridge Road in Piscataway by Infinity Biologix.
In another positive sign, Colliers noted that the state recently awarded a $10 million tax credit to Party City Holdings Inc., seeking to induce it to lease more than 200,000 square feet of office space in Woodcliff Lake. The approval came under the new incentive offering known as Emerge, the successor to the expired Grow New Jersey program.
“Occupancy losses over the last seven quarters totaled (8.3 million square feet), increasing the availability rate from 18.4 (percent) to 22.6 (percent) during this time,” Colliers wrote. “The reinstated incentive program has the potential to jumpstart demand in the state, after the pandemic added several million square feet of new space to the market.”