A rendering of the renovated 100 Metro Blvd. at the ON3 campus in Nutley, where Ralph Lauren Corp. has leased 255,018 square feet — Courtesy: Prism Capital Partners/Gensler
By Joshua Burd
New Jersey’s office market is riding high from a series of blockbuster leases over the summer, recording its highest quarterly increase in net absorption in two years.
A new market report by Newmark Knight Frank found nearly 870,000 square feet in positive absorption during the third quarter, which also exceeds the region’s five-year average of 135,020 square feet. Teva Pharmaceuticals’ highly touted, 345,000-square-foot lease at 400 Interpace Pkwy. in Parsippany led the way among deals closed during Q3, highlighting some familiar themes for the northern and central New Jersey office market.
“State incentives continue to drive the market’s largest deals,” Mark Russo, NKF’s research manager for northern New Jersey, wrote in the report. “These are typically landing at newly renovated assets, as the flight-to-quality trend persists.”
With the promise of a 10-year, $40 million state tax credit, the Teva deal boosted absorption totals because the company is relocating its U.S. headquarters from Pennsylvania. But the report highlighted several other large deals involving tenants that were moving within New Jersey, drawn by landlords that have upgraded their buildings.
For instance, global pharmaceutical firm Insmed leased 117,000 square feet at 700 Route 202/206 in Bridgewater, where Exeter Property Group is overhauling a 32-year-old complex. NKF also highlighted Ralph Lauren’s 255,018-square-foot lease at the ON3 campus in Nutley and E-Trade’s 132,265-square-foot renewal and expansion at Harborside Plaza 2 in Jersey City, both of which closed in Q3 with the help of the state’s Grow New Jersey program.
All told, availability in the market fell to 22.8 percent in Q3 from 23.3 percent at midyear, NKF found. Average asking rent ticked upward to $29.17 per square foot from $29.09.
Russo’s report also had several takeaways for individual submarkets:
- Telecommunications firm Nistica leased 35,000 square feet at a recently overhauled building at 440 Route 22 East in Bridgewater, while Aerie Pharmaceuticals took 34,007 square feet at the newly renovated 550 Hills Drive in Bedminster. Despite the demand, the Somerset/I-78 submarket is still grappling with corporate consolidations and has seen availability increase by 8.4 percent over the past two years.
- In Morristown, a $7 million renovation has paid off at 44 Whippany Road, resulting in a nearly 85,000-square-foot lease with Alvogen and several other deals, NKF said. Availability in the Morristown-area submarket declined from 24.4 percent to 23 percent over the quarter.
- The Hudson waterfront is also feeling the effects of consolidations and ended Q3 with availability of 19.3 percent, which is 650 basis points higher than two years ago. During the third quarter, Goldman Sachs listed a 114,819-square-foot block at its 42-story tower in Jersey City.