By Joshua Burd
The southern New Jersey office market picked up steam in the second quarter after what had been a cautious start to the year, according to new research from an area real estate firm.
In its newest market report, Wolf Commercial Real Estate tracked more than 395,000 square feet of second-quarter leasing activity in a region spanning Burlington, Camden and Gloucester counties. That total represents an increase from Q1 and a 58 percent increase from the second quarter of 2016, contributing to about 85,000 square feet of total net absorption.
Overall vacancy in the 17.5 million-square-foot, three-county market is now about 10.4 percent, down from 11.05 percent in the previous quarter, WCRE found. Average gross rents for Class A and Class B office space remained virtually unchanged at $20 to $24.50 per square foot.
“The overall mood of the market seems to be positive, riding a wave of steady moderate growth in the national economy, increasing expansion locally and investor interest from outside the region,” said Jason Wolf, founder and managing principal of WCRE in Marlton. “Office occupancy needs increased during the quarter, and we have been seeing increased capital spending and construction hiring this year for the first time in years.”
According to Wolf’s report, the largest deals of the Q2 included:
- Xerimis’s 64,000-square-foot renewal at 102 Executive Drive in Moorestown
- Comverse/AMDOCS 30,731-square-foot renewal at 1025 Briggs Road in Mount Laurel
- Maser Engineering’s 22,700-square-foot renewal and expansion at 2000 Midlantic Drive in Mount Laurel
- Premier Business Center’s 21,345-square-foot lease at 300 Atrium Way in Mount Laurel
- UBS’19,739-square-foot renewal at 501 Fellowship Road in Mount Laurel
“Having moved past what appeared to be a post-inauguration pause and winter slowdown, the overall tone is positive,” the report’s authors wrote. “In addition to rising valuations, average cap rates continue to compress for quality assets, office fundamentals have been steadily improving and vacancy rates have been stable for the past few quarters.”
The report noted that vacancy has improved in Cherry Hill and elsewhere in Camden County, where vacancy has dropped to 11.7 percent from 13.3 percent in the first quarter. But the county is also facing the prospect of larger blocks of space hitting the market, including those currently occupied by Subaru of North America and American Water Works.
Both companies are moving to new office buildings in Camden.
WCRE also found that investment sales activity totaled about 554,590 square feet and more than $46.1 million in value during the second quarter. That represents a 50 percent drop from Q1, the report said, but there is more than 3 million square feet of space actively on the market as longtime owners such as Mack-Cali Realty Corp. and Brandywine Realty Trust continue to shrink their presence in the market.