1 Executive Drive in Moorestown — File Photo
By Joshua Burd
Investment sales volume is on the rise for office buildings in three southern New Jersey counties, with nearly 800,000 square feet changing hands to start the year and another 2.7 million square feet on the market or under agreement.
Those are among the findings in a new first-quarter market report by Wolf Commercial Real Estate, which tracks activity in Burlington, Camden and Gloucester counties. The firm identified about 768,000 square feet worth of office sales during the three-month period for a total value of more than $133.5 million — more than double value of the previous quarter.
The largest deal during Q1 was the $19 million sale of Woodland Falls Corporate Center in Cherry Hill, which Crown Properties acquired from Brandywine Realty Trust, according to the WCRE report. The second-largest was Lone Star Funds’ $18.5 million sale of 401 White Horse Pike in Voorhees to ABS Management.
The Marlton-based real estate services firm also said there are more to come, including the 1.26 million-square-foot office and flex portfolio that was put on the market by Mack-Cali Realty Corp. earlier this year. WCRE said the company is close to reaching an agreement with an out-of-market firm, while there were about five other properties of at least 100,000 square feet on the market or pending through the end of March.
“Both users and investors bought buildings, and there have been several significant ownership changes in the region, which we expect will continue for the foreseeable future,” WCRE wrote in the report. “Many mid-size businesses acquired properties in order to become owner-occupants.
“The interest rate environment has been favorable for owner-occupied buildings, making the cost of ownership per square foot attractive to owners who previously leased their space.”
WCRE’s first-quarter report also included updates on office leasing in South Jersey. The firm tracked nearly 318,000 square feet of leases in the quarter, which represents a roughly 18 percent decline from Q4 2016 but is essentially unchanged from the same period a year ago.
Overall, net absorption for the quarter was around 122,572 square feet, WCRE said in the report. That left overall vacancy in the three-county region at roughly 11.05 percent, which the firm described as a nominal increase from the previous quarter.
Significant leases in Q1 included Virtua Medical Group’s 32,568-square-foot commitment at the Tri-Towne Plaza redevelopment site in Marlton and Farmers Insurance’s 22,885-square-foot renewal at 1000 Midlantic Drive in Mount Laurel. Health care and professional and financial services tenants continued to drive activity in the market during Q1.
Average gross rents for Class A and Class B space ranged from $20 to $24.50 per square foot for deals completed during the quarter, the report found. WCRE said that was essentially unchanged from the previous two quarters.
“Even with an expected winter slowdown affecting office leasing activity, and added anxiety with the transfer of political power in Washington, the overall mood of the market seems to be positive,” said Jason Wolf, founder and managing principal of WCRE. “As we’ve seen the past couple of years, several business sectors increased their occupancy needs during the first quarter, and we continue to see increased capital spending, construction hiring, and expansions.”
