Avison Young New Jersey 1Q13 Office Market Report

7/28/2019 Avison Young New Jersey 1Q13 Office Market Report

1/4

Avison YoungNew Jersey O ce Market Overview

partnership.

per ormance

1st Quarter 2013


2/4

New Jersey

Overview Snapshot

Northern New Jersey

Central New Jersey

Market activity was propelled by small and mid-sized tenants establishingtheir ootprints in attractive, transit-oriented submarkets, such as Morristown,MetroPark and Princeton. The leasing velocity in these strategic suburbansubmarkets is expected to continue throughout the year as larger tenantsconsolidate and relocate to capitalize on rail access and dynamic downtowndistricts with numerous amenities.

The limited number o large new leases, coupled with an increase in corporatedownsizing, resulted in the ascension o the overall availability to its peak level. As o the rst quarter o 2013, 22.2% o o ce inventory remains vacant,compared to 21.9% the previous quarter and 21.3% year-over-year. Asking rentscontinue to average lower, decreasing to $22.84 rom $22.95 per square oot the

previous quarter.

The market is seeing consistent activity as it continues to stabilize. The overallvacancy rate o 20.3% was virtually unchanged year-over-year, while askingrents, averaging $21.75 per square oot, declined more than a dollar during thesame period. Demand in the pharmaceutical sector, especially along EinsteinAlley in the Princeton corridor, is leading much o the activity.


3/4

partnership.performance.

First Quarter 2

New JerseyO ce Market Monitor

Market TakeawayMarket Facts

Vacancy Rates

YE08 YE09 YE10 YE11 YE12 YTD13

0%

5%

10%

15%

20%

25%

Asking Rents

YE08 YE09 YE10 YE11 YE12 YTD13$21.00

$22.00

$23.00

$24.00

$25.00

Net Absorption

YE08 YE09 YE10 YE11 YE12 YTD13(6,000,000)

(4,000,000)

(2,000,000)

0

2,000,000

New Jersey Overview The rst quarter o 2013 revealed a at New Jersey o ce market still recover

rom Hurricane Sandy and statewide corporate consolidations. However, glimmeo hope can be ound within suburban transit submarkets, which are seeing activi

rom tenants in search o live-work-play vibrancy and accessibility that will posithese companies strongly to attract the next generation work orce.

Despite the consolidation o large o ce users and the worst hurricane in stathistory, New Jersey posted its highest annual job growth since the dot-comexplosion, according to the U.S. Bureau o Labor Statistics. During 2012, 66 jobs were gained, including 59,100 in the private sector. Recent employment gainshould bode well or the states o ce market beginning in the latter part o this yeand throughout 2014.

For the rst quarter o 2013, negative net absorption o 277,000 square contributed to a slight increase in overall vacancy, rom 21.2% to 21.4%. Averaasking rents dipped slightly to $22.38 per square oot (ps ) rom $22.59 ps i

ourth quarter o 2012.

Overall, rst-quarter o ce market activity in New Jersey was propelled by smand mid-sized tenants establishing their ootprints in attractive, transit-orientesubmarkets, such as Morristown, Metropark and Princeton. The leasing velocin these strategic suburban submarkets is expected to continue throughout theyear as larger tenants consolidate and relocate to capitalize on rail access andynamic downtown districts with numerous amenities. State incentive packagealso continue to energize the market. This was the case or Honeywell who decide

to keep its corporate headquarters in New Jersey ollowing a two-year negotiation

Visionary developers are beginning to address the states growing number osuburban o ce parks that are being le t behind by the ongoing consolidation andrelocation o large tenants. For example, in Northern New Jersey, Vision Equitwhich is redeveloping the ormer Alcatel-Lucent complex in Whippany or Bhas expressed interest in acquiring the companys soon-to-be vacated Wayne andMontville acilities or possible redevelopment. Additionally, in Central New JeSomerset Development has been named the designated redeveloper o the ormeBell Labs property, comprising an existing 2-million-square- oot (ms ) builand 473 acres in Holmdel. As more o the large corporate business parks redeveloped to better satis y the needs o todays corporate tenants, the businesparks will acilitate, rather than hinder, positive absorption.


4/4

Largest New Jersey Transactions

Trends to Watch

Market Drivers: Health Services, Technology/Telecommunications,Manufacturing (includes Pharmaceutical),

Active Markets: Bergen East, Metro Park/Woodbridge, Princeton,Route 24.

Fascinating Fact: Since February 2010, New Jersey private sector employment has increased by 120,600 jobs (United States Bureau of Labor Statistics).

2012 Avison Young. The in ormation contained herein was obtained rom sources deemed reliable and is believed to be true; it has not been veri ed and as such, cannot be warranted nor orm any part o any uture contra

Tenant Name Address City Square Feet

Covance, Inc. 206-210 Carnegie Center West Windsor 225,000

Dr. Reddy's Laboratories College Road Princeton 105,000

Zoetis (P zer) 100 Campus Drive Florham Park 98,105

Contact In ormationJefrey Heller Managing Director of New Jersey 973.753.1100 | [email protected]

Matthew Dolly Vice President of Research973.898.4016 | [email protected]

1120 Headquarters PlazaWest Tower, 4th FloorMorristown, NJ 07960

www.avisonyoung.com

Northern New Jersey Overview The limited number o large new leases, coupled with anincrease in corporate downsizing, resulted in the ascension o the overall availability rate in Northern New Jersey to its peak level. Large blocks o space vacated on the Hudson Water rontby UBS and Marsh & McClennan contributed to the increase, inaddition to the recent announcement by Goldman Sachs thatit will be vacating a portion o its space at its Jersey City o cetower, the tallest o ce building in New Jersey.

Zoetis, P zers animal-health company spinof, signed thelargest lease during the quarter, taking 98,105 s at 100 CampusDrive in Florham Park. It is anticipated, however, that P zersconsolidation plans will result in large blocks o vacant spaceat Giralda Farms in Madison. Honeywells decision to remain inNew Jersey was a win or the state, however, a large corporateheadquarters will be vacated. The group Citizens or BetterPlanning in Morris Township views the Honeywell departureas a potential opportunity or redevelopment, a commontheme among recently vacated large single-tenant corporateheadquarters locations.

As o the rst quarter o 2013, 22.2% o o ce inventoryremains vacant, compared to 21.9% the previous quarter and21.3% year-over-year. Asking rents continue to average lower,decreasing to $22.84 rom $22.95 ps the previous quarter.

Central New Jersey Overview The Central New Jersey o ce market is seeing consistenactivity as it continues to stabilize. The overall vacancy rate o20.3% was virtually unchanged year-over-year, while askinrents, averaging $21.75 ps , declined more than a dollar durinthe same period.

Demand in the pharmaceutical sector, especially along EinsteinAlley in the Princeton corridor, is leading much o the activi

At Carnegie Center, Covance renewed two leases totalingapproximately 225,000 s which included an expansion an additional 9,000 s . Otsuka also leased space at CarnegCenter, and will occupy approximately 80,000 s . The compais leaving behind a long-term 102,000 s sublease at UniversiSquare, but is believed to be on the hunt or additional space inthis market. A bit urther to the north, Dr. Reddys Laboratorsigned new leases totaling 105,000 s s at College Road Princeton.

Despite some positive signs in the Central New Jersey o cmarket, MetLi e recently announced it will be closing Somerset o ce as part o a nationwide consolidation, andshedding jobs during the next three years. The news is ablow or the Piscataway/Somerset submarket, which is ststruggling to recover rom the glut o o ce space le t behinby Fortune 500 giants such as AT&T in the early 2000s.

Avison Young New Jersey 1Q13 Office Market Report

Documents

Transcript of Avison Young New Jersey 1Q13 Office Market Report