Middle Market Digest – The Northeast

Here is a roundup of the latest leases, sales and other transactions in the Northeast middle markets.

This week by the numbers

Declining vacancies within class B properties and market-wide increases in asking rents proved to be the two most-encouraging indicators amid an otherwise indifferent quarter in the Northern and Central New Jersey office market, according to Cushman & Wakefield. The first quarter of 2018 started off more slowly than expected, due in part to unexpected delays in finalizing several large transactions, combined with the recent return of several large blocks of vacant space to the state’s office inventory.

“While overall quarterly demand was down from previous quarters, market watchers were pleased to see asking rents in class A assets reach record levels,” says Andrew Judd, Cushman & Wakefield’s New Jersey market leader. “Yet at the same time, the market sustained most of its year-to-date occupancy losses within class A assets situated in four localities — the Hudson Waterfront, Bergen County, the I-78 Corridor and the Princeton/Route 1 Corridor.”

Only five new leases greater than 25,000 square feet closed during the quarter, and only two of those exceeded 50,000 square feet, noted Jason Price, Cushman & Wakefield’s New Jersey research director. Yet renewal activity remained healthy, he said, as eleven tenants occupying more than 20,000 square feet committed to staying at their current locations. The largest among them was a short-term, 91,235-square feet renewal by AXA Equitable Life Insurance in Secaucus.

The Northern and Central New Jersey office market struggled to gain traction during the quarter, with vacancy ticking higher to 18.6 percent, a level 70 basis points above one year ago. The lethargic pace of large deal closings and the entry of some substantial vacant blocks combined to push net absorption into negative territory for Q1. Class B assets, fueled by tenants smaller than 10,000 square feet, saw net absorption for the quarter finish at 190,574 square feet. As a result, class B vacancy declined 50 basis points since year-end, to 16.7 percent. This category’s vacancy rate now stands at 16.7 percent, down from 18.5 percent during the first quarter last year.

The average asking rental rate continued to tick upwards, as higher-priced class A space entered the marketplace and the class B office market tightened. This dynamic pushed class B rents nominally higher since last quarter. On a year-over-year basis, asking rents were up across all property types. Class A rents rose over that period by 5.5 percent to a highest-ever level of $32.86 per square foot, while Class B rents climbed 3.2 percent to $23.74 per square foot. The Hudson Waterfront recorded a quarterly increase of 2.3 percent, leading all submarkets statewide at $45.21 per square foot. The Morristown submarket increased 1.9 percent, to $30.34 per square foot.

Several submarkets experienced improvements in vacancy during the quarter, led by the Upper 287 Corridor, where the level fell 270 basis points to a recent low of 17.5 percent. The Morris Route 10/24 Corridor experienced a 60 basis points drop to 19.4 percent, Newark’s rate fell 30 basis points to 16.0 percent, and Monmouth County’s rate ticked lower by another 10 basis points to 11.0 percent, the lowest level of any major New Jersey submarket.

While quarterly demand totaled only 1.3 million square feet, down from previous quarters, some submarkets continued to experience healthy new leasing activity throughout the quarter. Fueled by the life sciences company Lonza America’s 75,000-square feet lease, Morristown experienced the largest quarterly rise in leased space, marking a recent quarterly high. Monmouth County, the Meadowlands, and the Upper 287 Corridor also recorded quarter-over-quarter increases in deal volume.

Deal Tracker Daily

JERSEY CITY, NJ—Just six months after opening its doors to renters, the luxury 15-story apartment development, Lenox, is 50-percent leased. Located at 207 Van Vorst Street, Lenox includes 255 studio, one-, two- and three-bedroom homes that are complimented by a thoughtfully-curated collection of high-end amenities rarely found in the Jersey City market, as well as more than 7,200 square feet of ground-floor retail space.

JERSEY CITY, NJ—Fisher Development Associates says Vantage, its new luxury rental high-rise in downtown Jersey City, NJ, has received LEED certification from the US Green Building Council (USGBC). Located at 33 Park View Avenue, the 45-story waterfront building achieved LEED certification for implementing practical and measurable strategies and solutions aimed at achieving high performance in: sustainable site development, water savings, energy efficiency, and indoor environmental quality. The LEED rating system, developed by the USGBC, is the foremost program for buildings, homes and communities that are designed, constructed, maintained and operated for improved environmental and human health performance. Vantage features 448 rental apartments and approximately 5,000 square-feet of supportive retail space.

PHILADELPHIA, PA—Within the last month, Ian Richman and Marc Isdaner of Colliers International completed the sale of three industrial buildings in Pennsauken, NJ. 9240 Commerce Highway, Pennsauken, NJ was sold for $3.25 million to a private investor. The building is a 67,600 square foot multi-tenant warehouse; 6995 Airport Highway Lane, Pennsauken, NJ (pictured), a 60,800 square-foot manufacturing facility, was sold for $2.74 million to Heat Makers Sense, a Brooklyn, NY, hair care products distributor; 9265 Commerce Highway, Pennsauken, NJ, a 33,500 square-foot single tenant warehouse purchased for $1.69 million by Draco Broadcast. Draco Broadcast, based in Silicon Valley, CA, is expanding and wanted an East Coast Operation. They provide professional-grade equipment for the video and broadcast industry. The building features 5 loading docks, 3 drive-in doors and 18’-20’ ceilings.

CHESHIRE, CT—Sky Management Services has purchased 611-617 West Johnson Avenue in Cheshire, CT. This property is a four-building flex complex totaling 210,000 square feet, with all four buildings adjacent to one another. Sky is conducting an aggressive capital improvement and marketing program at the site and is seeking to secure new tenants by offering very competitive leasing terms, while remaining dedicated to the retention of existing tenants.

Money Moves

PHILADELPHIA, PA—Michael J. Sweeney has been named a vice president for Avison Young’s Suburban Philadelphia region. Sweeney has more than 12 years of experience in commercial real estate, with specific expertise in lease negotiations, tenant renewals and relocations, and implementation of multi-state strategic real estate planning. Before joining Avison Young, Sweeney was a director with Cushman & Wakefield.

PHILADELPHIA, PA—Keystone Property Group hired Todd Monahan as a regional director. Monahan will be responsible for overseeing Keystone’s portfolio in and around Philadelphia, as well as Moorestown Corporate Center in Moorestown, NJ.

EDISON, NJ—Bussel Realty Corp. named Scott Turner a vice president of the firm’s brokerage division. Turner will be responsible for new business development, sales and leasing brokerage and property marketing services at the firm. Turner brings more than 33 years of sales and marketing experience to his new position. Formerly a sales associate at Coldwell Banker Commercial, Turner generated new development deals for a multi-family and retail developer as well as provided market and financial analysis. He was also a member of their Global Client Solutions team for the Northeast US region.

PLAINVIEW, NY—EW Howell Construction Group’s president, Howard Rowland, has been named chairman of the Associated General Contractors of New York State for 2018. Rowland joined EW Howell in 1982 and has been president of the firm since 1997. During his one-year term as AGC NYS Chairman, Mr. Rowland will become a spokesperson for the association and the construction industry in New York. He will play an integral part in member retention and recruitment and will run several meetings over the course of the year. Along with the board members, Rowland will examine and address current trends and events, and how those issues may impact membership, the organization, and the industry.