NJ office market continues a slow but steady rebound.
At 1.63 million square feet, absorption was at its highest level of the past five years. The market achieved this strong positive absorption despite a 19 percent deceleration in leasing velocity. This fact underscores a significant decrease in the amount of newly available space (direct and sublease) coming on to the market.
There is wide divergence in the performance of New Jersey's 20 submarkets. Two in five market segments actually saw their availability rates rise in the past year. However, other segments that were particularly hard-hit in the real estate downturn, including the Waterfront and Parsippany, made substantial strides toward the road to recovery. As New Jersey real estate, bolstered by a stronger local economy, continues to improve, we expect the gap between market segments and property types to narrow and pricing to widen gradually.
While the New Jersey real estate market has not yet achieved the prosperity reminiseent of the 1980s, it has clearly turned a comer. Most indicators are up and an improving economy should add impetus to the budding market recovery.
The first signs of a market rebound began to emerge in mid 1992. Since then, expansion of the tenant base has removed over 3.1 million square feet from the available supply. The 1.63 million square feet of net absorption represented an 8 percent improvement over last year.
Two-thirds of the market's net absorption over the past year occurred in the Waterfront segment, which saw its availability rate plunge by over 11 percentage points from 26.8 to 15.1 percent. Other markets showing favorable absorption and availability trends include Parsippany, Urban Essex, Western Route 78 and Route 287/Piscataway/Brunswicks
Stronger leasing was a boon to many of these segments. Four of the market's five largest transactions occurred in the Waterfront and Parsippany segments: Lehman Brothers (319,000 square feet in Jersey City); ADP (198, 000 square feet in Parsippany); Silver Burdette & Ginn (151,000 square feet in Parsippany); and Dialogic Corporation $135,000 square feet in Parsippany). Despite this activity, however, overall leasing of 7.67 million square feet was below the 9.52 million square foot pace of a year ago.
Three market segments continue to display unusually tight market characteristics which restrict relocation options: Western Route 78, Route 287/78 Interchange and Chatham/Millburn/Short Hills. At the opposite end of the spectrum, the Route 17 Corridor, with an availability rate more than double the market average, has yet to display signs of participating in the real estate recovery.
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|Author:||Bermingham, Thomas V.|
|Publication:||Real Estate Weekly|
|Date:||Jul 20, 1994|
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