A rendering of redesigned tenant space at 2 Gateway Center in Newark — Courtesy: Onyx Equities/Gensler
By Joshua Burd
The amount of available office space in New Jersey grew further in the second quarter, despite leases by technology and life sciences tenants and signs of improvement on the horizon.
A new report by Newmark said as much, finding that the amount of occupied office space in northern New Jersey fell for the sixth consecutive quarter leading into midyear. Notably, more than 900,000 square feet of additional sublease space hit the market over the past three months, continuing a trend that was especially evident in the first quarter.
The findings tempered some of the report’s more positive observations.
“Tenant activity is steadily picking up in the northern New Jersey office market as companies reopen workplaces following the lifting of COVID-19 restrictions in June,” the Newmark team of Mark Russo and Colin Hyde wrote in the report. “While the demand outlook is improving, current conditions continue to favor tenants with availability at a record-high of 26.4 percent, up 50 basis points from last quarter.”
The researchers said tenants in the technology, life sciences, health care and education sectors, which fared relatively well during the pandemic, dominated recent activity. That was reflected by WebMD’s 101,000-square-foot lease at 2 Gateway Center in Newark, which represented the largest new lease of the quarter and the largest new tenant to land at Gateway Center since a group led by Onyx Equities purchased and set out to overhaul the complex in early 2019.
Life sciences firm Infinity BiologiX signed the second-largest new lease of Q2 with a 98,000-square-foot commitment at 30 Knightsbridge Road in Piscataway, Newmark found. The report noted the company has been partnering with Rutgers University to create a COVID-19 saliva test, while the lease contributed to the 139,164 square feet of positive net absorption in the Piscataway and Interstate 287 submarket, the region’s highest such total for the quarter.
Still, the amount of sublease space on the market in North Jersey grew to 9 million square feet heading into midyear, up 62.5 percent from the start of 2020, Newmark said. Some new additions include a 215,000-square-foot space listed by Allergan at 5 Giralda Farms in Madison, which represents half of the space that the pharmaceutical company leased in 2016, along with a 116,000 square-foot availability at 77 Corporate Drive in Bridgewater by IQVIA.
The report, fortunately, indicated that the amount of sublease space on the market may be peaking. The research team cited moves during Q2 by Citibank and Dun & Bradstreet, which pulled back or backfilled a combined 207,000 square feet of sublease space at 480 Washington Blvd. in Jersey City and 101 John F. Kennedy Parkway in Short Hills, respectively.
“Leasing activity should also drive sublease availability lower, helped by the fact that more than 80 percent of the sublease inventory is located within Class A buildings that benefit from the flight-to-quality trend,” Russo and Hyde wrote. They pointed to two subleases during the spring by Apprentice.io and Score, which took space at 101 Hudson St. in Jersey City and 121 River St. in Hoboken, respectively.
With respect to pricing, Newmark said asking rents in northern New Jersey remained stable at midyear, averaging $30.01 per square foot, although many landlords are offering tenants increased concession packages.