30 Knightsbridge Road in Piscataway
By Joshua Burd
The state’s office market saw modest gains during the second quarter, even as landlords continue to grapple with high vacancy and new blocks of space coming available in suburban locations.
A new market report from Newmark Knight Frank tracked a slight decline in availability during the quarter to 22.9 percent from 23 percent, the result of 91,480 square feet of net absorption. Renewals accounted for the largest deals of the quarter, including AT&T’s 252,500-square-foot commitment to stay at 30 Knightsbridge Road in Piscataway and Otsuka’s 137,580-square-foot lease at 506-508 Carnegie Center in West Windsor.
The limited but positive activity offered a reprieve from two quarters of setbacks that resulted in a combined 2.4 million square feet of negative absorption, NKF found.
“After losing ground for the past two quarters, the northern New Jersey office market saw a small amount of positive momentum during the second quarter of 2017,” Mark Russo, the firm’s research manager in northern New Jersey, wrote in the quarterly market report.
While suburban submarkets accounted for most of the leasing activity, new availabilities in the suburbs also accounted for new vacancies in the state. NKF found that availability in the Parsippany/Route 10 submarket jumped during the spring to 34.1 percent from 32 percent. Occupiers such as The Medicines Co. and Crum & Foster put large blocks of space on the market at 8 Sylvan Way and 260 Cherry Hill Road, respectively, contributing to more than 360,000 square feet of overall negative net absorption in the Parsippany area.
In the Metropark submarket, availability rose two percentage points to 21.3 percent due largely to Daiichi Sankyo vacating 114,434 square feet, the report found. The Japanese pharmaceutical company has consolidated its New Jersey footprint into a new headquarters building at 211 Mount Airy Road in Basking Ridge.
Russo’s report noted several bright spots in the market.
The firm said availability in the Piscataway-area submarket fell to 23.7 percent from just above 25 percent in Q1. That also marks a significant drop from a year earlier, when availability averaged 28.3 percent.
Deals such as Terumo Medical Corp.’s 95,023-square-foot renewal and expansion at 265 Davidson Ave. and Johnson & Johnson’s 58,870-square-foot lease at 300 Davidson Ave., both in Somerset, have helped drive the rebound in the lower part of Interstate 287. NKF said landlords in that submarket and others continue to upgrade their buildings with new amenities and renovations.
The report also highlighted the largest sale of the quarter, a $69 million transaction that saw Barclays PLC acquire a three-building, 525,000-square-foot office park in the Whippany section of Hanover. Vision Real Estate Partners and Rubenstein Partners sold the campus, five years after acquiring it for $25 million and embarking on more than $10 million in improvements.
“The growing glut of space on the market since the middle of 2016 has taken a pause for now,” Russo wrote. “This one-step-forward, one-step-back trend has defined the northern New Jersey market during the current economic expansion as a result of lackluster job growth and companies squeezing more employees into less square footage.
“However, there are reasons to forecast improvement,” he continued. “Obsolete office buildings are being redeveloped with other uses, which is reducing supply. Meanwhile, New York-based companies continue to move employees to New Jersey. These factors should exert downward pressure on availability over the next couple of years.”
