NJ Tenant Concessions Are Higher than National Average
“With unemployment below 4 percent, companies are focusing on making smart decisions about their space – decisions that keep their employees happy and engaged,” says Revathi Greenwood, Americas head of research at Cushman & Wakefield.
EAST RUTHERFORD, NJ—New Jersey’s rate of tenant concessions jumped 13.5 percent year over year in 2017, a larger increase than the national average, and fifth highest in the nation, according to Cushman & Wakefield’s new report, Space Matters.
The report dives deeply into national trends in four areas of importance to tenants and landlords, office density, amenities, parking and concessions.
The firm’s New Jersey research team assembled regional comparison for one of these vital benchmarks. According to Cushman & Wakefield’s New Jersey research team, the region’s jump was only outpaced by San Jose/Silicon Valley and three gateway markets (New York, San Francisco, and Boston).
“Free rent grew from an average of $13 to $14 per square foot last year, and TI allowances increased from $30 to $35,” says Jason Price, New Jersey research director. “While vacancy rates are in line with historical norms, rental rate growth was strong during 2017; the rent uptick was partially propped up by the cost of concessions. For 2018, we expect free rent averages to remain stable, and TI allowances will likely shrink. Conversely, our Space Matters report reveals that half of local markets in the U.S. are expected to see increased TI allowances in 2018.”
The national report examines in detail four top trends in office space:
- Office density: Occupiers have been allocating less square footage per employee, but that trend is starting to slow down as businesses grapple with the right balance of personal, private, communal, and break space.
- Amenities: Common amenities—such as fitness centers and cost-effective food options—still remain very important. However, there is large opportunity for growth in how technology amenities are leveraged by occupiers and landlords.
- Parking: In many urban sub-markets parking supply is a challenge. Prices have been increasing, and occupiers are looking at creative options to meet the challenge. Also looming in the future is what impact autonomous vehicles may have on parking demand.
- Concessions: Free rent and tenant improvement allowances increased over the past year, but gains were driven by gateway markets in 2017. This trend will spread, and some secondary markets will soften as absorption slows down and/or new supply comes online.
“With unemployment below 4 percent, companies are focusing on making smart decisions about their space – decisions that keep their employees happy and engaged,” says Revathi Greenwood, Americas head of research at Cushman & Wakefield. “Landlords are playing a critical role as well – ensuring their buildings stay competitive with a good mix of amenities, and affordable parking, and of course concessions where necessary to attract top tenants.”