EVESHAM TOWNSHIP, NJ—While the national economy was affected by turmoil in the global markets, the Southern New Jersey commercial real estate market continued its progress for another quarter, according to the latest quarterly analysis from commercial real estate brokerage WCRE.

An expected summer slow-down did slow the pace of transactions, but overall growth, expansion, and positive absorption stayed on track. Healthcare, insurance, financial services, defense contracting, and technology companies led the way.

“As in the past several quarters, we saw a healthy volume of transactions due to business expansion and improving job growth during the third quarter,” says Jason Wolf, founder and managing principal of WCRE. “We also saw an uptick in deal activity among small and mid-size businesses, which is welcome good news that the market had been waiting for.”

Many factors contributing to continued strength in the market, Wolf tells GlobeSt.com exclusively. Theseinclude large and small lease deals, the beginning of new construction activity, several investment acquisitions of office properties, and continued repositioning among the area's REITs. Much of the activity stems from new money flowing into the market from investors located elsewhere.

“On the investment side of the market, we're seeing a lot of out-of-town money coming into the South Jersey market,” says Wolf. “We're seeing most of the money and equity coming in from New York or outside of the South Jersey area, where they are seeing opportunities or value that maybe a local investor is not seeing.”

This quarter's activity also includes a bump in Camden development under the Grow NJ tax incentives program, including the recently announced 1.7 million square-foot mixed use development that Liberty Property Trust is seeking to build along the waterfront.

“The Grow NJ program has been a home run for the south jersey market,” Wolf says. “The good news is we're seeing large companies making major commitments. The concern for the local owners and operators of real estate in the area is, what's going to happen to these vacant buildings three to five years from now when the companies that have promised to move to Camden have vacated all this space? We still have three years to worry about that, we still have a little bit of time.”

According to WCRE, in the third quarter, nearly 478,000 square feet of new leases and renewals were executed. This is a nearly 20 percent improvement over the third quarter a year ago. New tenant leases consisted of about 280,360 square feet, and renewals and expansions made up approximately 197,623 square feet.

New leasing activity represented approximately 58.7 percent of all deals for the quarter. Overall, gross absorption for the third quarter is in the range of approximately 233,610 square feet. In addition to the consummated deals, there is a pipeline of approximately 350,000 square feet of significant pending lease deals expected to close in the near term.

Other office market highlights from the report:

• Overall vacancy in the market continues to drop, and is now down to approximately 12.15 percent, an improvement of three quarters of a point over the previous quarter. Vacancy in Burlington County is now down to eight percent, while in Camden County it stands at 16.3 percent. Wolf says the main reason for the difference is that Burlington County has traditionally been a hub for corporate, higher-end class A “trophy” assets, while there is more leaseable real estate in Camden County. Burlington County office space tends to be newer and more modern than the product available in Camden County.
• The majority of leasing activity for the third quarter was comprised of deals ranging in size from 3,000-80,000 square feet.
• Average rents for Class A & B product continue to show strong support in the range of $10.00-$13.00/sf NNN or $21-$23 per square foot gross, with an overall market average showing strong support in the $10-$13 per square foot triple-net or $20-$23 per square foot gross for the deals completed during the quarter. Rents have remained stable.
• All of the major private owners and REITS showed moderate leasing and prospect activity for the quarter – with Burlington County vacancies tightening up, many larger vacancy opportunities are also shifting towards Camden County, which is not controlled by these ownership entities.

WCRE also reported on the local retail market, finding moderate growth amid repositioning by major retailers and a few big events in the South Jersey region. The biggest news was the opening of the Gloucester Premium Outletsin Blackwood, NJ in August, which features 90 retailers. WCRE's report also covers major moves involving PNC, Cheesecake Factory, Walgreens, and A&P Supermarkets.

“Even with major retailers like Macy's and Walgreens shuttering under-performing locations nationwide, malls and outlets report steady consumer traffic and moderate growth, which is likely fueled by the rebound in the labor market,” says Leor Hemo, executive vice president of WCRE.

Highlights from the retail section of the report include:

• Overall retail vacancy in the tri-county area is hovering around 10.4 percent, which is virtually unchanged from the previous two quarters, but is still encouraging compared to recent years.
• Class A retail product rental rates continue to show strong support in the range of $30-$40 per square foot triple-net, as rents have remained stable throughout the year to date.