Strong economy fuels NJ market.
Mergers and acquisitions have created a game of musical chairs within New Jersey's pharmaceutical industry. Mega-deals such as Glaxo Wellcome/Smithkline Beecham, Pfizer/Warner-Lambert and Monsanto/Pharmacia and Upjohn seem to occur on a daily basis, prompting many pharmaceuticals to seek large blocks of office space to accommodate expanded or consolidated headquarter operations. Aventis Pharma, the child of multiple mergers, recently leased 350,000 square feet in Parsipanny as a new 640,000 square-foot complex is being built in Bridgewater.
The space that has been freed up in research and development buildings has been quickly absorbed. While these specialized facilities often sell below replacement costs, the existing infrastructure has helped to anchor the industry in New Jersey. The merger of CIBA Geigy and Sandoz, which created Novartis, freed up 800,000 square feet of research and development space in larger complex in Summit. This space has not yet been sold, and provides opportunities for the swiftly expanding pharmaceutical industry.
Pharmaceuticals remain a significant industry for the state. During the past eight quarters, New Jersey saw 204 lease transactions greater than 20,000 square feet for a total of 12.2 million square feet. Of this number, the pharmaceutical industry was responsible for 12 transactions and a total of 1.5 million square feet. This activity accounted for six percent of the total number of New Jersey lease transactions and 12 percent of all space leased in the state.
Overall, a total of 12.3 million square feet of space was leased in New Jersey during 1999, down slightly from 1998 when Pharmacia & Upjohn took more than 650,000 square feet in two separate transactions and Prudential Insurance Company took more than 400,000, also in two transactions. While more than 1 million square feet of new inventory came onto the Northern New Jersey market in 1999, the majority of this space has been absorbed and the availability rate has not increased significantly, indicating a stable market.
Class A availability in New Jersey's 13 submarkets stood at 10.6 percent at yearend with the average rental rate increasing by nearly $1 from the third quarter to $25.66. All other property categories recorded a 16 percent availability rate and an average rental rate of $20.70, up $.24 over the previous quarter.
The Morris submarket experienced some activity at the end of 1999. In addition to the 350,000 square-foot Aventis Pharma lease in the Morris Corporate Center IV in Parsippany, the State Farm Mutual Automobile Insurance Co. chose Gale & Wentworth Construction Services to build a 400,000 square-foot office building, also in Parsipanny. This submarket saw its Class A availability rate decrease by 22 percent to 11.9 percent in the fourth quarter, while its rental rate for Class A space was little changed at $27.64 per square-foot.
Leasing increased in the Suburban Essex submarket with 278,361 square feet of space leased in the fourth quarter. Class A inventory accounted for a majority of this activity, with 190,749 square feet absorbed in the fourth quarter. However, the Class A availability rate increased to 17.5 percent in the fourth quarter from 14.2 percent in the third.
The Waterfront submarket was the beneficiary of a strong economy and the tight market in Manhattan, which prompted a spate of lease signings and new construction. The Newport Office Center III and 90 Hudson Street, the first two spec office buildings in this submarket in 10 years, were fully leased before completion. While leasing activity fell off 83 percent from the third to fourth quarters, the availability rate in this submarket continued to tighten and rental rates increased. The Class A rental rate increased $3.91 to $32.11 per square-foot and all other Classes were up more than $1 to $27.08.
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|Author:||Giannone, Thomas V.|
|Publication:||Real Estate Weekly|
|Article Type:||Brief Article|
|Date:||Jan 26, 2000|
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