The upgraded café at Lincoln Place in Edison — Courtesy: Newmark Knight Frank
By Joshua Burd
Landlords that have renovated and refreshed New Jersey’s aging office stock can now point to the benefits, with a new report showing significantly stronger absorption and rent growth at upgraded buildings.
The research by Newmark Knight Frank found that more than one quarter of the office inventory in northern and central New Jersey has been renovated since 2014, accounting for more than 31 million square feet of upgraded space. Those new-look properties have tallied 3.4 million square feet of positive net absorption over the past five years, the report found, while assets that were not renovated have seen more than 1 million square feet of negative absorption.
The report highlights a host of improvements that have become common in recent years among entrepreneurial office landlords and investors, from upgraded lobbies and mechanical systems to new cafés and fitness centers. Those strategies have yielded several other trends in the northern and central New Jersey office market, which NKF has quantified:
- The availability rate at upgraded buildings has declined by 9.5 percent over the past five years, while it has increased by 2.2 percent among properties that were not improved.
- Asking rents at renovated properties average $31.63 per square foot and have grown by 19.6 percent over the past five years.
- Asking rents at properties that were not upgraded have shown slower growth, increasing by 14.5 percent during the same period.
“Highly amenitized and modern spaces show well to prospective tenants and compete easily against outdated facilities,” said Jamie Drummond, a broker and senior managing director with NKF.
Led by Mark Russo, NKF’s research manager in northern New Jersey, the report found that nearly half of the new leasing activity year to date has taken place at upgraded buildings. Those properties include 400 Interpace Pkwy. in Parsippany, where Teva Pharmaceuticals took 345,488 square feet; 700 Route 202/206 in Bridgewater, where Insmed leased 117,000 square feet; and 581 Main St. in Woodbridge, where Plymouth Rock inked a 129,600-square-foot lease.
NKF is also tracking 11.7 million square feet of additional renovation projects that are either currently underway or scheduled to begin soon, including the nearly 700,000-square-foot campus known as LATITUDE at the former Morris Corporate Center IV in Parsippany.
Meantime, Russo pointed to the next evolution of the trend, such as large standalone amenity buildings and athletic facilities like the 130,000-square-foot Life Time facility that SJP Properties is building at Somerset Corporate Center in Bridgewater. He also cited the holistic, mixed-use environments that Somerset Development and Prism Capital Partners are building at the Bell Works and ON3 campuses in Monmouth County and northern New Jersey, respectively.
“As core components such as fitness centers, cafeterias and lobby updates become increasingly common, landlords will need to expand their amenity offerings to stay competitive,” Russo said. “Tenants, meanwhile, can take advantage of the abundance of updated properties and find amenity-rich spaces that allow them to attract and keep talented employees.”