NJ office, industrial markets show positive trends.

The Research Services Group at Cushman & Wakefield of New Jersey in East Rutherford has issued its first quarter 1996 office and industrial market reports covering 11 counties in northern and central New Jersey.

The office market continues on its positive track. And, while the industrial market experienced some recession after three years of growth, optimistic trends are emerging.

Northern and Central New Jersey's overall office vacancy rate declined during the first quarter of 1996 and is now at its lowest level since 1989 - 18.7 percent.

"This strength can be attributed to positive growth trends and strong leasing activity, several large user purchases and modest, though sustained, economic growth," noted Donald P. Eisen, senior managing director of Cushman & Wakefield. "The steady absorption of Class A space during the past year has resulted in Class B space satisfying many of the larger requirements."

During the past three months, the Class A vacancy rate decreased a full percentage point to 14.7 percent, while the Class B vacancy rate decreased 1.7 points to 21.3 percent. Available space declined by more than 800,000 square feet in the first quarter, and by more than 1.9 million square feet during the past year.

"For the third straight quarter, Morris County led the state's overall activity," Eisen said, adding that the largest lease of the quarter and the two biggest user purchases occurred there. This includes American Cyanamid's acquisition of a 386,000 square-foot facility at One Campus Drive in Parsippany, from Prudential Insurance.

Somerset and Monmouth counties also experienced significant activity, exceeding their respective amounts from the first quarter of 1995. Other active sub-markets, which have already surpassed 200,000 square feet of leasing activity this year and have consistently performed well, include Woodbridge/Edison and suburban Princeton, as well as Bergen County's Route 17 North/GSP North corridor.

Despite the sharp decline in available space, virtually no absorption has been reported during the first three months of 1996. This is the result, in part, of several buildings becoming completely owner-occupied, as well as five blocks of more than 50,000 square feet coming onto the market.

While the gross average asking price for Class A space remains approximately $22.50 per square foot, unchanged from last year at this time, some county-wide averages have increased significantly. This includes Morris County, with nearly a $2 per square foot jump, and Hudson County, with an increase of almost $1 per square foot.

Industrial Market

The northern and central New Jersey industrial market, which is one of the nation's largest warehouse distribution centers, has recessed after experiencing more than three years of growth. Overall available space increased by 600,000 square feet during the first quarter and by more than 1.5 million square feet during the past six months.

"New supply has outpaced demand on the largest blocks of space," Eisen noted, adding that eight properties larger than 200,000 square feet came onto the market during the first quarter, while only one lease of that size was executed.

The five northern New Jersey counties accounted for 1 million square feet of new vacancies during the first quarter. In Morris County alone, four large blocks became available totalling 800,000 square feet.

Central New Jersey, on the other hand, experienced a modest decline in available industrial space since fourth quarter 1995. Activity in Middlesex County accounted for seven of the region's nine transactions of more than 100,000 square feet. The biggest was USA Detergents, lease of 192,000 square feet at 2960 Woodbridge Avenue in Edison, NJ.

In addition, 19 deals of more than 100,000 square feet closed during 1996's first three months. This resulted in a 35 percent increase in gross leasing and sales activity from fourth quarter 1995 and represented the highest level since mid-year 1995.

"Positive trends are also visible in the warehouse distribution and high-tech sectors," Eisen added. At present, construction is underway on eight speculative buildings of more than 50,000 square feet and six build-to-suit facilities of more than 200,000 square feet. This includes a 360,000-square-foot building leased to Tommy Hilfiger U.S.A. Inc. in South Brunswick, NJ.

In the manufacturing sector, 1.6 million square feet of activity represents the largest level of demand in more than four years. This includes the largest lease in the Meadowlands in eight years, in which T. Gambino Dynamic Express signed a long-term agreement for a 577,000 square-foot facility on Central Avenue and Second Street in Kearny, NJ.

Overall asking rental rates increased slightly to $4.56 per square foot. Seven of the 10 counties in northern and central New Jersey experienced increases in asking rental rates, including Monmouth County, which had a 47-cent increase.

"With a continued healthy economy fueling the base of warehouse and high-tech facilities, and the increase in manufacturing activity, 1996 could result in a positive year for the market," Eisen concluded.