PARSIPPANY, NJ– Colliers International NJ reports there was modest absorption of office space during the 4th quarter, which analysts said adds a bit of hope to prospects for 2013.
Avison Young and other end-of-the-year reports have indicated the amount of vacant
space increased slightly in the quarter. Colliers’ Robert J. Martie said his company’s recorded absorption of 329,243 square feet.
“Though not a surefire indicator of performance in the year to come, at the very least, it propels the market into 2013 with guarded optimism,” Martie said..
AY’s research director Matthew Dolly agreed on the score of optimism, citing several other reasons to hope as well. The jobless rate has been coming down since last summer, for one thing, notes AY in its new report. Gov. Christopher J. Christie said the same in his State of the State speech last week.
The unemployment rate is 9.6%, down from 9.9% in August.
Other analysts have not necessarily predicted positive impact on the market based on slightly improved unemployment numbers. Colliers’ report says leasing in northern and central New Jersey is likely to be flat through at least the first half of 2013, given the negative pressure of state budget concerns, intense interstate competition, and “ongoing job woes.”
However, AY’s research director Matthew Dolly says that the perception of Gov. Christopher J. Christie’s administration as “pro-business” has and will continue to bolster the market. The governor is up for re-reelection this year, but Dolly notes that political analysts say he is well-positioned to win re-election and suggests that would engender a positive sense of stability.
“Gov. Christie may become the first governor to serve more than one term since Christine Todd Whitman,” observes Dolly, whose firm is headquartered in Morristown. Whitman served as GOP head of state from 1994 until 2001. “Stability with an administration seen as pro-business can help keep the commercial real estate market on the right track,” he says.
At the end of 2012, market sluggishness was attributed to uncertainty over the national election, followed by Hurricane Sandy slamming into the Garden State coastline.
In Q4 2012, average asking rents were down 1.7% year-over-year, and down 8.2% from five years ago, according to AY..
In northern New Jersey, where vacancy levels were 21.9%, a full point higher than at year-end 2011, rents averaged $22.95 per square foot, according to AY.
One of the larger deals in northern Jersey in the fourth quarter was Evergreen Shipping’s 42,236-square-foot relocation to 95 Greene Street in Jersey City. However, that was a short-term lease after superstorm Sandy damaged the company’s existing facilities.
“Moving forward, there are more than a dozen tenants in the market seeking a total of 100,000 square feet and nearly 50 properties that can accommodate these requirements,” the report says. Since tenants can afford to be selective in such a market, a number of large blocks have remained vacant for more than two years, it notes.
In the central part of the state, the market is improving, with positive absorption of office space for the sixth time in eight quarters, AY reports. The overall vacancy rate had peaked as high as 22.9 in Q4 2010. At year’s end 2012, it was 20.2%.
Global IT services provider EMC Corp. signed an 81,683 square-foot-lease at Center 78 in Warren in a relocation move from Boston in one large center-state transaction.
It moved to offices formerly occupied by Lucent Technologies that had been listed on the market and vacant for nine years. Center 78 has been newly renovated by Normandy Real Estate Partners, which acquired the property slightly more than a year ago.
“The commitment by the landlord to renovate follows a trend to help accommodate tenants seeking ideal occupancy conditions,” AY notes, “especially when committing to larger blocks of space formerly constructed for the needs of a single tenant.”