A rendering of M Station, a planned mixed-use redevelopment project on Morris Street in Morristown — Courtesy: SJP Properties/Scotto Properties/Gensler
By Joshua Burd
New Jersey’s office market saw two major leases and a pair of blockbuster sales in the first quarter, headlining an active start to the year before the onset of the coronavirus crisis.
A new report by Newmark Knight Frank noted that the industry is now bracing for the impact of COVID-19, which brought tours to a halt and stalled corporate decision-making in the final two weeks of March. Before that, the state saw several high-profile transactions in top submarkets such as Morristown, Metropark and the Hudson waterfront, among others.
On the leasing front, Hackensack Meridian Health took 115,000 square feet at 499 Thornall St. and 50,000 square feet at neighboring 399 Thornall St. in Edison, NKF found in its report. In Morristown, Deloitte LLP committed to 110,000 square feet at the proposed M Station project by SJP Properties and Scotto Properties, with plans to move its New Jersey operations from 100 Kimball Drive in Parsippany to the mixed-use complex.
NKF also pointed to several blockbuster sales during Q1. In January, LeFrak closed the sale of 545 Washington Blvd. in Jersey City, an 860,000-square-foot building occupied mainly by JP Morgan Chase, to Harbor Group International for $372 million. Later that month, KBS completed the $311 million sale of the six-building, 1.2 million-square-foot Park Avenue at Morris County campus in Florham Park.
“The first quarter was relatively active both in terms of leasing and capital markets up until the last two weeks when activity slowed significantly as the COVID-19 social distancing measures went into effect,” wrote Mark Russo, the research manager in NKF’s northern New Jersey office. “The impact on office market statistics should become more apparent over the next quarter.”
The report, by Russo and Research Analyst Colin Hyde, also cited some sizable new availabilities that were listed during Q1, leading to negative net absorption in northern and central New Jersey. More than half of that occurred in the Somerset/I-78 submarket, where the owner of 477 Martinsville Road in Basking Ridge listed 250,000 square feet currently occupied by Everest Re Group, which will soon move to the Warren Corporate Center in Warren.
Meantime, NKF recorded 220,888 square feet of negative net absorption in the Hudson waterfront submarket during Q1. While interest in the submarket has slowed thanks in part to the expiration of the state’s incentive programs, the report also noted that a combined 220,000 square feet became available in January at 480 and 499 Washington Blvd.
All told, negative net absorption across the state totaled more than 420,000 square feet during the first quarter, NKF found. Availability increased by 10 basis points to 21.8 percent, while the overall average asking rent surpassed $30 per square foot for the first time ever after increasing by 1.8 percent over the past year.
Of course, the report noted that market dynamics changed dramatically in mid-March.
“COVID-19 social distancing measures, including business closures, went into effect in New Jersey during the last two weeks of the first quarter of 2020,” NKF wrote. “The associated cancellations of tours and in person meetings accompanied by stalled corporate decision making has slowed office tenant activity throughout Northern New Jersey.”