SADDLE BROOK, NJ-CBRE Group tells GlobeSt.com that there is a bright side to the mostly-cloudy commercial office picture this spring. Demand is unambiguously up.

“Leasing velocity, at 1.9 million square feet so far this year, is the highest since 2007,” says Jeff Hipschman, senior managing director of the New Jersey office.

He said CBRE counts 171 tenants in the market – which is 16% more than were taking tours of Jersey office space at this time last year.

The prospective tenants require a combined six million square feet — a 22.6% increase from 2012. The average size of requirements is up from a year ago at this time, too: from 31,935 square feet to 33.665 square feet.

“These numbers are an encouraging indicator that New Jersey's economic climate is improving due to the state's continuous focus on business attraction and retention through incentives,” said Hipschman.

He acknowledged that overall vacancy rates remain stubbornly high – but said that plays out in particular submarkets, but not in others.

Last week, Cushman & Wakefield had released a study indicating the vacancy rate in northern New Jersey has risen in recent months to 19.1%, the highest rate in recent history.

Large corporate dispositions of space caused a spike: Bayer and Crum & Forster each placed over 200,000 square feet on the market during the first quarter . Also, C&W noted that several large financial institutions have recently unloaded large blocks of space at the Hudson Waterfront –where finance has long been the “defining industry” - and have plans to continue doing so.

While C&W expects occupancy in central NJ to improve slightly this year, it predicts that northern NJ “can be expected to slip further, barring an unexpected plethora of new demand.”

CBRE's Hipschman said, “There is a lot of concern about future space coming on the market, but the other thing to look at is: Demand is certainly not diminishing.”

Occupancy is easier to track, he notes. “We track roll-offs of leases, and back in 2011, we saw that '12 , '13 and '14 would be more active years, because of the increased number of leases rolling.”

A different way to consider the marketplace involves tracking economic indicators, including consumer confidence, Hipschman said. “Every time consumer confidence goes up, a year or so later, the availability rate starts to come down. Nationally, right now we have a reported 75.2% consumer confidence score – the highest in five years.

“The improving economic conditions and a continued drop in the state's unemployment rate, which is at its lowest level in four years, bodes well for future demand,” he said.

Hipschman said that Saddle Brook-based CBRE may also have a more up-to-date grip on what is happening in the market than other market analysts simply because it has so many brokers in the field. The firm's 90-broker team is one of the largest in the state.

CBRE reports submarkets that are drawing the most interested tenants right now are Princeton, with 27 who have toured buildings; suburban Essex/eastern Morris County, with 22; Parsippany, with 21; and the Route 287/78 Interchange, with 20.

Of the six million square feet being considered by tenants in the market, the suburban Essex/eastern Morris and Waterfront submarkets have the greatest availability. Tightening submarkets include Chatham/Millburn/Short Hills, Western Route 78, Montvale/Woodcliff Lake, the Route 17 Corridor, suburban Essex/eastern Morris and Princeton.

Instant Insights /

The Good News: Rising Demand for Office

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