SADDLE BROOK, NJ—New Jersey's office market is showing signs of improvement driven by growing demand in the market, according to CBRE's First Quarter 2015 New Jersey Office MarketView Report.

“Though New Jersey's office market statistics point to a moderate start for 2015, there were signs in the first quarter that bode well for the market in the near term. Several of the state's most notable occupiers expanded their real estate footprints in Q1 and, during this same period, we saw a number of large requirements engage the market,” Rob Norton, vice president, CBRE, tells GlobeSt.com exclusively. “Overall, activity in the first quarter was reflective of the continued confidence and fervor that we're seeing in the office sector and beyond.”

Leasing velocity in New Jersey amounted to 1.36 million square feet in the first quarter, representing a 9.1 percent decline compared to Q4 2014. However, the list of companies that expanded their real estate occupancy in New Jersey this quarter was especially notable:

• Dun & Bradstreet renewed and expanded by an additional 62,666 square feet in the Chatham/Millburn/Short Hills submarket.
• Regus added two locations to its expanding inventory of office suites.
• Chugai Pharmaceutical more than doubled its office occupancy in the Route 287/78 corridor.

New Jersey's core office markets continued to attract the majority of leasing activity. The Parsippany, Chatham/Millburn/Short Hills and Morristown submarkets accounted for 69.5 percent of velocity in the northern portion of the state, while Princeton and Parkway Corridor accounted for 70.4 percent of velocity in the central portion. Insurance and pharmaceutical companies dominated activity during the first quarter, led by transactions from Arthur J. Gallagher & Co., Cigna Insurance and Taiho Pharmaceutical Co.

“Looking beyond the fundamentals, it's important to note that recent demand demonstrates growth, which will continue to drive leasing activity in New Jersey, especially across the most-desirable, mass-transit submarkets and newer or redeveloped product,” says Jeff Babikian, executive vice president, CBRE. “This demand will serve to further counteract the historically-downcast perception that many have of the suburban office market.”

Expansion led to positive absorption for New Jersey overall. However, several large blocks came onto the market and counteracted what would have otherwise been significant positive absorption. In the north, 217,524 square feet at 2 Paragon Drive and 89,200 square feet at 400 Chestnut Ridge Road pulled availability higher in the Montvale/Woodcliff Lake submarket. In the Waterfront submarket, 178,867 square feet at 525 Washington Boulevard and 77,472 square feet at 545 Washington Boulevard hit the market. In the central portion of the state, Route 287/Piscataway/Brunswicks and Princeton saw large blocks come available at 300 Davidson Avenue and 1 Continental Drive respectively.

In the first quarter, the Grow NJ Assistance Program continued to drive leasing activity. Four companies received $36.1 million in incentive packages and signed 207,675 square feet of new leases, which represented 15.3 percent of the state's overall leasing velocity. Since its inception, Grow NJ has been responsible for 12,463 new jobs and 13,679 retained jobs.

“The health of the office market is exemplified through strong statewide job growth and retention,” says Norton. “We're currently tracking at least 21 active occupier requirements of 100,000 square feet or greater—23.5 percent more than at this same time last year. Consequently, it is expected that the New Jersey office market will continue to strengthen.”