Fourth Quarter 2016 / New Jersey
Office
Market Facts
~12.4 million sf
Full year 2016 office leasing volume
2.0 percent
Annual rent growth for
New Jersey overall
16.1 percent
Quarterly vacant available rate
Partnership. Performance. Economy
According to the New Jersey Department of Labor & Workforce Development, the New Jersey
private sector added only approximately 500 jobs in the fourth quarter 2016, bringing the total
jobs created in 2016 to approximately 14,800. Although a very modest gain in employment
in 2016, this marks the seventh consecutive year of employment growth in the New Jersey
private sector. The strongest industries in terms of growth included health services, financial
activities and manufacturing. What does this mean for New Jersey real estate? Over the past
five years, the office sector experienced growth of 5.5 percent in direct average asking rents
since 2011 and just 2.0 percent in 2016 alone. Meanwhile, the industrial sector was stronger
and experienced growth of 22.0 percent since 2011 and 10.5 percent in 2016. Going forward,
we expect this trend to continue in 2017, with positive rental growth in industrial, well
outpacing that in the office sector.
Office
Leasing
The New Jersey market experienced a significant drop off in leasing activity during the fourth
quarter of 2016, coming in at 2.4 million square feet. This is significantly less than the 4.1
million square feet in the third quarter and the 3.6 million square feet during the fourth quarter
of last year. The quarterly drop off is partly attributed to the lower number of large block
transactions (100,000+ square feet).
The northern New Jersey market, consisting of Bergen, Essex, Hudson, Morris and Passaic
counties made up close to 58.0 percent of the total 2.4 million square feet of leasing activity for
the entire market during the quarter with 1.4 million square feet of leasing activity. The fourth
quarter volume is down from the 2.4 million square feet last quarter and 1.8 million square feet
during the same period last year.
avisonyoung.com
New Jersey
Despite the drop in volume within northern New Jersey, the largest lease was executed
by software provider, Fidessa Corporation (77,998 square feet), who was incentivized by
the Grow New Jersey job creation program to relocate to 70 Hudson Street in Jersey City.
In doing so, Fidessa will bring 340 full time jobs to the Hudson Waterfront upon their
November 2017 relocation from Manhattan. The central New Jersey Market, consisting
of Hunterdon, Mercer, Middlesex, Monmouth, Somerset and Union counties had 980,031
square feet of leasing activity during the fourth quarter of 2016. This was a drop from the
1.7 million square feet last quarter and 1.6 million square feet last year during the fourth
quarter.
While the central New Jersey market experienced a deep decline in leasing, one of the
largest new leases was Jersey City Power & Light’s (JCP&L) relocation to 101 Crawfords
Corner Road in Holmdel from 331 Newman Springs Road in Red Bank, still within Central
New Jersey. JCP&L’s 64,000 square feet lease places the company in the former Bell
Labs campus (Bell Works) alongside future tenants iCIMS and WorkWave LLC who are
scheduled to move in the first and second quarters of 2017, respectively.
Vacancy
The vacancy rate for the New Jersey office market was flat quarterly at 16.1 percent and
down 20 basis points annually. Total absorption was negative for the fourth time in the
past five quarters, with the only exception being the third quarter of this year.
Rents
The direct asking rental rates dropped to $26.93 per square foot in the fourth quarter.
The Hudson Waterfront had the highest direct asking rents during this period at $42.08
per square foot. The Hudson Waterfront average direct asking rent increased nearly 50.0
percent over the past four years, compared to 5.0 percent growth for the rest of the New
Jersey market. The Hudson Waterfront’s strong mass transportation system as well its
vicinity to Downtown Manhattan has made it a prime location for many financial services
companies over the past few years.
Sales
According to Real Capital Analytics, there was over $880 million worth of sale transactions
completed during the fourth quarter of 2016. This represents a decline from the $1.1
billion in the third quarter. One of the largest office sales this quarter was the purchase of
Two Riverfront Plaza in Newark by Kuwait-based Muthanna Investment Company for $165
million. SJP Properties and Matrix Development finalized construction on this property
three years ago, initially to serve the needs of Panasonic Corporation for its North
American headquarters.
Fourth Quarter 2016 / Office
MARKET DATA POINTS
New Jersey
Indicator
4Q15
4Q16
Vacancy
16.3%
16.1%
Rent
$26.42
$26.93
Northern New Jersey
Indicator
4Q15
4Q16
Vacancy
16.9%
16.8%
Rent
$27.06
$27.32
Central New Jersey
Indicator
4Q15
4Q16
Vacancy
15.5%
14.9%
Rent
$25.56
$26.47
Trends to Watch
• The repurposing of lower quality office space: Owners are considering repurposing
their lower quality buildings into medical, residential and high quality industrial
space as demand wanes for suburban office space.
• The 2017 New Jersey Gubernatorial and State Assembly elections: In 2017 the entire
State Assembly and Governor positions are up for election. With a new governor
guaranteed to be put in place, firms in and out of the State will keep a close eye on
any new business policies.
Partnership. Performance. avisonyoung.com
New Jersey
Fourth Quarter 2016 / Office
Selected Sale Transactions
Building
Submarket/Market
Sale Price
Price PSF
Size (SF)
Two River Front Plaza, Newark
Newark/Northern New Jersey
$165,000,000
$489
337,543
100 Plaza Drive, Secaucus
Meadowlands/Northern New Jersey
$62,000,000
$234
264,973
10 Sylvan Way, Parsippany
Parsippany/Central New Jersey
$44,000,000
$350
125,829
Selected Lease Transactions
Tenant
Building
Submarket/Market
Type
Size (SF)
Fidessa Corporation
70 Hudson Street,
Jersey City
Hudson Waterfront/
Northern New Jersey
Direct
77,998
Allstate Insurance Company
1130 Route 22 East,
Bridgewater
Route 22 West/Central New Jersey Direct
66,554
Jersey Central Power & Light
101 Crawfords Corner
Road, Holmdel
Monmouth/Central New Jersey
64,000
Direct
Market at a Glance
New JerseyNewJerseyOfficeMarketTotalNetAbsorption
Office Market Total Net Absorption (sf) (sf)
New Jersey Office Vacant Availability Rate and Inventory Growth
NJOfficeVacantAvailabilityRateandInventoryGrowth
1,800,000
17.0%
0.50%
16.0%
0.25%
1,000,000
600,000
200,000
InventoryGrowth
VacantAvailable%
1,400,000
-200,000
-600,000
15.0%
-1,000,000
Q4 2013 Q2
Q1
Q3
Q4 2014 Q2
Q1
Q3
Q4 2015 Q2
Q1
Q3
Q4 2016 Q2
Q1
Q3
Q4
0.00%
VacantAvailable Percent%Total NJ
Q4
Q3
Q2
Q4
2016Q1
Q3
Q2
Q4
2015Q1
Q2
Partnership. Performance. Q3
Q4
2014Q1
Q3
Q2
Q4
2013Q1
Q3
NJInventoryGrowth
2012Q2
-1,400,000
2012 Q3
Q2
avisonyoung.com
New Jersey
Fourth Quarter 2016 / Office
Fourth Quarter - New Jersey by the Numbers
Submarket
Inventory (SF)
Total Vacant Available Rate (%)
Quarter Net Absorption (SF)
YTD Net Absorption
Direct Asking Rent
Northern New Jersey
Bergen Central
6,708,713
15.3%
529
-23,942
$27.58
Bergen East
8,241,843
13.1%
9,416
87,831
$26.38
Bergen North
9,196,992
11.8%
148,913
135,168
$27.67
Hudson Waterfront
21,949,016
10.6%
-83,661
-587,083
$42.08
Meadowlands
6,620,770
16.6%
27,465
1,324
$25.83
Morristown Region
12,250,386
25.8%
-181,703
16,610
$28.18
Newark/Urban Essex
15,746,418
16.2%
40,558
79,282
$29.16
411,444
26.3%
-9,545
-29,049
$20.27
Parsippany
16,995,721
20.5%
144,386
254,771
$26.76
Short Hills/Millburn
2,892,283
4.1%
7,158
33,303
$35.77
Suburban Essex/Rt. 280
9,202,214
12.4%
-46,770
28,680
$28.04
Wayne/Paterson
9,315,919
25.3%
11,156
10,316
$20.93
Western Morris
2,985,850
40.4%
921
-17,090
$22.94
122,517,569
16.9%
68,823
-9,879
$27.32
Brunswick/South Edison
5,270,803
15.7%
-84,703
8,667
$27.71
Hunterdon Cluster
4,426,190
28.9%
-5,140
-9,459
$21.53
Monmouth
11,263,458
14.7%
114,722
230,950
$25.16
North Edison/Woodbridge
5,920,995
16.8%
-20,759
59,978
$32.60
Princeton North
9,157,494
18.7%
-622,957
-655,838
$26.74
Princeton South
17,674,892
13.5%
101,596
207,914
$28.15
Route 22 West
5,172,464
14.4%
-31,816
11,885
$23.66
Route 287
9,575,045
15.8%
66,987
231,293
$19.76
Route 78 East
15,741,554
8.9%
-8,661
-94,946
$28.43
Union
4,230,477
16.7%
52,416
-39,783
$23.36
Central New Jersey
88,413,372
14.9%
-438,315
-49,339
$26.47
210,950,941
16.1%
-369,492
-69,097
$26.93
Northwest Frontier
Northern New Jersey
Central New Jersey
New Jersey
Numbers as of 1/3/17
Partnership. Performance. avisonyoung.com
Fourth Quarter 2016 / New Jersey
Industrial
Industrial
Leasing
The white hot New Jersey Industrial market posted positive
net absorption for yet another quarter, while leasing activity of
6.6 million square feet was down quarterly from 7.4 million. As
a comparison, over 12.2 million square feet of leasing activity
occurred in fourth quarter 2015, which is more than double the
most recent quarterly figure.
The Central New Jersey Industrial market had 4.3 million square
feet of leasing activity in the fourth quarter 2016. One of the
largest transactions for the sector was by service provider DSV
Global Transport and Logistics. The company executed a 507,519
square feet lease at 1005 West Middlesex Avenue in Port Reading.
For Northern New Jersey, the industrial market had 2.3 million
square feet of leasing activity in the fourth quarter, a significant
drop off from 4.1 million square feet in the prior quarter and 5.1
million square feet one year ago but still remaining a very active
market. In Secaucus, Range Rover of Manhattan leased 154,830
square feet at 77 Metro Way, a sizable transaction for the market.
Vacancy & Rent
The overall vacancy rate of 4.9 percent was virtually stable with last
quarter’s 5.0 percent, but was down from last year’s 6.2 percent.
Overall average asking rental rates rose due to strong demand,
coupled with limited inventory. This has given landlords much of
the leverage and pricing power in lease negotiations. Rental rates
rose to $6.88 per squafe foot, up from $6.68 last quarter and up
from $6.23 one year ago.
Partnership. Performance. Sales
One of the largest industrial sales during the fourth quarter 2016
was that of 750 Union Avenue in Union (Bridge Point Port West).
The 263,415 square feet building completed construction earlier
in 2016, and then was sold by Bridge Development Partners to J.P.
Morgan Asset Management for approximately $46,500,000 ($177
per square foot). The building is currently fully leased to Boxed.com
and Union Beverage Packers.
Trends to Watch:
• The new federal adminstration’s handling of trade and
international agreements: The new adminstration has said
they will re-evaluate all of the country’s trade agreements. This
could lead to a shift in the amount of goods both imported
and exported, forcing many of New Jersey’s industrial tenants
to reevaluate their business models and their need for
industrial space.
• The potential growth in popularity of multi-story industrial
space: As land for industrial space has become more scarce,
many owners might decide that building up could be the
solution. During the fourth quarter of 2016 it was reported that
Prologis Inc., one of the largest owners of industrial space in
the country, would be building their first two-story warehouse
in Seattle, WA.
avisonyoung.com
New Jersey
Fourth Quarter 2016 / Industrial
Market at a Glance
Northern New Jersey vs. Central New Jersey NNN
NorthernNewJerseyvs.CentralNewJerseyNNNDirect
Direct Asking Rent Industrial
Market
AskingRentIndustrialMarket
Net Absorption >24’ Ceiling Heights vs. <24’ Ceiling Heights
NetAbsorption >24'Ceiling Heightsvs.<24'CellingHeights
$7.50
4,000,000
$7.00
3,000,000
$6.50
2,000,000
$6.00
1,000,000
0
$5.50
$5.00
-1,000,000
2012 Q3 Q4 2013 Q2 Q3 Q4 2014 Q2
Q2
Q1
Q1
NNNRentDirectNorthern
Q3 Q4 2015 Q2 Q3 Q4 2016 Q2 Q3 Q4
Q1
Q1
NNNRentDirectCentral
-2,000,000
2012 Q3
Q2
Q4 2013 Q2
Q1
NNNRentDirectNJ
Q3
Q4 2014 Q2
Q1
NetAbsorptionSFTotal>24
Q3
Q4 2015 Q2
Q1
Q3
Q4 2016 Q2
Q1
Q3
Q4
NetAbsorptionSFTotal<24
Selected Sale Transactions
Building
Submarket/Market
Sale Price
Price PSF
Size (SF)
350 Starke Road, Carlstadt
Meadowlands/Northern New Jersey
$76,000,000
$228
332,796
750 Union Avenue, Union
Union/Central New Jersey
$46,500,000
$177
263,415
10 Bloomfield Avenue, Montville (GLP Portfolio)
Eastern Morris/Northern New Jersey
$20,300,000
$116
174,400
1 Chapin Road, Montville (GLP
Eastern Morris/Northern New Jersey
Portfolio)
$14,200,000
$107
133,400
Selected Lease Transactions
Tenant
Building
Submarket/Market
DSV Global Transport
Logistics
1005 West Middlesex
Avenue, Port Reading
Brunswick/Piscataway/Central New Jersey Direct
507,519
Bob’s Discount Furniture
50 Middlesex Avenue,
Carteret
Union/Central New Jersey
Direct
359,965
Range Rover
77-79 Metro Way,
Secaucus
Northern Bergen/ Northern New Jersey
Direct
154,830
Partnership. Performance. Type
Size (SF)
avisonyoung.com
New Jersey
Fourth Quarter 2016 / Industrial
Markets By The Numbers
Submarket
Inventory (SF)
Total Vacant Available Rate (%)
Qtr Net Absorption (SF)
YTD Net Absorption
Direct Asking Rent
Northern New Jersey
Bergen Central
24,687,576
6.0%
-59,220
-167,705
$7.72
Bergen North
22,800,205
7.3%
167,737
302,201
$9.05
Eastern Morris
20,422,219
6.8%
-134,698
133,767
$6.47
Hudson Waterfront
32,969,169
6.0%
43,889
1,623,527
$7.01
Meadowlands
91,569,467
4.2%
487,366
1,448,244
$7.32
Morris West/I-80
15,708,826
7.7%
-144,097
-487,339
$6.30
Morristown Area
4,962,374
13.7%
-426,741
-269,484
$10.64
Newark
35,889,495
3.7%
19,548
464,457
$6.24
Northwest Frontier
2,618,364
4.1%
1,848
120,868
$8.50
Rt 46/23/3
49,854,346
3.9%
84,835
668,490
$7.70
West Essex
24,052,641
5.8%
24,900
285,999
$7.78
Northern New Jersey
325,334,682
5.2%
65,367
4,123,115
$7.35
Brunswick/Piscataway
171,256,222
3.3%
631,001
4,383,821
$6.61
Mercer
32,612,774
11.9%
-248,854
-283,256
$4.45
Monmouth
19,926,183
3.0%
65,365
200,899
$7.74
Union
76,066,252
4.2%
465,996
2,246,021
$6.46
Somerset
31,359,158
5.9%
215,163
496,026
$6.53
Central New Jersey
331,220,589
4.6%
1,128,671
7,043,511
$6.26
New Jersey
656,755,271
4.9%
1,194,038
11,166,626
$6.88
Central New Jersey
Numbers as of 1/3/17
Partnership. Performance. avisonyoung.com
New Jersey
Market Report
Fourth Quarter 2016
For more information, please contact:
avisonyoung.com
Jeffrey L. Heller
President and Managing Director, New Jersey
973.753.1100
[email protected]
© 2017 Avison Young. All rights reserved.
E. & O.E.: The information contained herein was obtained from
sources which we deem reliable and, while thought to be
correct, is not guaranteed by Avison Young.
1120 Headquarters Plaza
North Tower, 8th Floor
Morristown, NJ 07960
Jason Bloom
Research Manager
973.753.1081
[email protected]