By Joshua Burd
Office leasing in New Jersey rebounded in 2022, showing notable improvement from a year earlier despite a mixed fourth quarter and ongoing economic uncertainty.
A report by Cushman & Wakefield said the market saw 1.6 million square feet of leasing activity in Q4, bringing the full-year total to 8.3 million square feet. That marked a 9.7 percent uptick from 2021 and the highest full-year leasing tally for northern and central New Jersey since 2019, the firm said, thanks to improved fundamentals and an acceleration of users seeking higher-end space.
“Significant commitments from large corporate, life science and health care institutions bolstered activity, continuing an accelerated flight to quality trend,” said Josh Cohen, a managing director with Cushman. “Encouraging momentum from year-end into 2023 is marked by firms of all industries and sizes reassessing footprints and reimagining the purpose and strategy of the office going forward. There is no doubt that this trend endures and we are watching its impact to net absorption and the ongoing need to repurpose obsolete office inventory.”
The research found that, despite strong demand, large blocks of vacant space continued to return to the market. That stalled further improvement and caused the vacancy rate in the region to increase 70 basis points year over year to 20.7 percent.
A separate report by CBRE tracked 5.6 million square feet of completed office leases in northern and central New Jersey during 2022, up 41 percent from 2021. That included 1.24 million square feet in Q4, which was 7 percent behind the five-year quarterly average and down 6 percent from the previous quarter.
CBRE also found that average asking rent at year-end was $30.82 per square foot, up 10 percent from year-end 2021.
“While economic uncertainty and concern over a recession continue to be on the front burner, New Jersey’s office market showed signs of a real recovery in 2022 as leasing improved significantly from a lackluster 2021,” said Remy deVarenne, a senior vice president with CBRE. “Although there are headwinds ahead, there will continue to be user demand in the stronger markets in New Jersey.”
The largest lease of Q4 was a 250,000-square-foot sublease at 5 Giralda Farms in Madison. CBRE did not identify the tenant, but outside reports listed the user as Bristol-Myers Squibb, which is taking the space from Abbvie.