A rendering of an upgraded common space at Latitude, a two-building, 700,000-square-foot office complex that is being renovated by Vision Real Estate Partners and Rubenstein Partners — Courtesy: Vision Real Estate Partners/Nelson
By Joshua Burd
Office tenants continued their flight to new and improved spaces as 2019 came to a close, furthering the case for landlords to upgrade or redevelop New Jersey’s aging stock of buildings.
To that end, owners in three of the state’s suburban submarkets landed the largest deals of the fourth quarter, according to a new report by Newmark Knight Frank. In Parsippany, Reckitt Benckiser extended its 187,000-square-foot lease at Latitude — the rebranded, 700,000-square-foot complex formerly known as Morris Corporate Center IV — which is now undergoing a physical transformation by Vision Real Estate Partners and Rubenstein Partners.
The joint venture also signed a new lease at the complex during Q4, landing a 39,810-square-foot commitment from the accounting firm Sax LLP, according to NKF’s report. Reckitt Benckiser and Sax, which is relocating from Clifton, accounted for the largest and fifth-largest leases in the final three months of 2019 in northern and central New Jersey.
Meantime, snack food maker Promotion in Motion signed the largest new direct lease of the quarter, committing to 110,945 square feet at 225 Brae Blvd. in Park Ridge, the report found. The deal, Bergen County’s largest new office commitment in more than two years, will bring new life to a building that was Hertz’s longtime headquarters before the rental car giant left New Jersey, contributing to high availability in the Bergen North submarket.
As a result the Promotion in Motion deal and other recent activity, NKF said availability in the submarket has declined by 290 basis points from Q3 to end the year at 26.6 percent.
“The submarket suffered from some high-profile corporate departures in recent years, including Mercedes-Benz, which moved to Atlanta, and Pearson Education, which relocated to Hoboken,” NKF Research Manager Mark Russo wrote. “Both of their campuses have since been demolished which, along with recent leasing activity, has allowed availability to decrease in the submarket.”
All told, NKF said the northern New Jersey office market ended the year with stable conditions, as availability declined slightly from 21.9 percent to 21.8 percent during the fourth quarter. The firm identified more than 600,000 square feet in net absorption over the past 12 months, while availability fell by 60 basis points.
The average asking rent continues to rise slowly, increasing by 1.4 percent over the past year, NKF said, though some submarkets are seeing stronger growth. The report added that total inventory in the region shrank by 1 million square feet in 2019 as obsolete buildings are getting torn down and removed from statistics.
“The Northern New Jersey office market saw positive momentum in 2019, with availability declining and asking rents rising in select submarkets,” the report’s authors wrote. “Looking ahead, fundamentals are poised to continue to improve steadily entering the next decade.”
Russo and Colin Hyde, a research analyst in NKF’s Rutherford office, also highlighted the Woodbridge area as a strong performer in late 2019. The region saw two of the state’s top four leases during Q4: DSV Air & Sea’s 97,500-square-foot commitment at 200 Wood Ave. South, along with BNP Paribas’ renewal for 66,226 square feet at Woodbridge Corporate Plaza.
The DSV transaction contributed to the 111,937 square feet of net absorption recorded for the Metropark and Garden State Parkway submarket during the quarter, NKF found.
“Over the past year, Metropark has seen a flurry of leasing activity,” Russo wrote. “Total deals closed in 2019 exceeds 500,000 square feet, which is nearly double the amounts seen in each of the previous two years. The activity included major renewals with IBM and TIAA at 194 Wood Avenue South as well as more than 100,000 square feet in leasing at Woodbridge Corporate Plaza.”
Among other findings, NKF noted that landlords in a handful of submarkets have managed to push rents, despite the overall high availability rate in New Jersey. Bergen Central saw asking rents for Class A space rise by 6.4 percent over the past year, the firm said, thanks in part to its 16.7 percent availability rate and upgrades by building owners.
The firm also cited growth in Newark, where an ongoing revitalization and the introduction of new space pushed Class A asking rents up by 4.3 percent over the past year.