Northern NJ Office Market Showing Improvement Heading into 2020

MORRISTOWN, NJ—The Northern New Jersey office market showed signs of stability and improvement at the end of 2019 positing positive net absorption, lower availability and higher asking rents, according to a report released by Newmark Knight Frank.

The brokerage firm reports that the fundamentals of the Northern New Jersey are poised to continue to improve steadily entering 2020.

The office market in Northern New Jersey ended the year with stable conditions as availability declined slightly from 21.9% to 21.8% during the fourth quarter. Over the past 12 months, more than 600,000 square feet in net absorption was recorded while availability fell by 60 basis points.

The average asking rent in the Northern New Jersey office market continued to rise, increasing by 1.4% over the past year, though some submarkets are seeing stronger growth, Newmark Knight Frank states in its report. Total inventory shrank by 1.0 million square feet in 2019 in Northern New Jersey as obsolete buildings are getting torn down.

The highlight for the region’s office market was the November lease deal by Promotion in Motion, which was the largest transaction in Bergen County in two years. The snack food manufacturer leased 110,945 square feet for a new headquarters office in Park Ridge. The company, which is best known for producing Welch’s brand fruit snacks, is relocating to 225 Brae Blvd., which was previously owned and occupied by Hertz rental car company before it moved its global headquarters to Florida. Promotion in Motion currently occupies facilities in Allendale and Somerset.

The report, authored by NKF’s research director Mark Russo and research analyst Colin Hyde, states the Bergen North submarket, which includes Park Ridge, had the second highest availability rate in the Northern New Jersey market as of the end of third-quarter 2019. Availability has since declined by 290 basis points to end the year at 26.6%.

The submarket suffered from some high-profile corporate departures in recent years, including Mercedes-Benz, which moved to Atlanta, and Pearson Education, which relocated to Hoboken. Both of their campuses have since been demolished which, along with recent leasing activity, has allowed availability to decrease in the submarket.

During fourth-quarter 2019, DSV Air & Sea leased 97,500 square feet at 200 Wood Ave. South in Iselin. The Danish transport and logistics company’s new office is located near the Metropark train station, which offers both Amtrak service regionally and NJ Transit service to New York City. DSV currently leases offices at 100 Walnut Ave. in Clark. The transaction contributed to the 111,937 square feet of net absorption recorded for the Metropark/GSP submarket during the quarter.

Over the past year, Metropark has seen a flurry of leasing activity. Total deals closed in 2019 exceeded 500,000 square feet. The activity included major renewals with IBM and TIAA at 194 Wood Ave. South, as well as more than 100,000 square feet in leasing at Woodbridge Corporate Plaza.

The report also pointed to major leasing activity during the fourth quarter at Latitude—the rebranded Parsippany complex formerly known as Morris Corporate Center IV. British consumer good company Reckitt Benckiser renewed its lease at the complex for 187,000 square feet. Also, accounting firm Sax LLP leased 39,810 square feet at the property and will be relocating from 855 Valley Road in Clifton. The 700,000-square-foot complex, which was acquired by Rubenstein Partners and Vision Real Estate Partners in early 2018, is undergoing a major renovation that includes more than 30,000 square feet of amenity spaces with two fitness centers and multiple dining options. Availability in Parsippany has declined by 40 basis points over the quarter and 230 basis points since one year ago, but still remains relatively high averaging 28.9%.

Availability in the Meadowlands averaged 27.0% in the fourth-quarter of 2019, up 1.3% from the previous quarter and 4.7% from one year ago. Contributing to negative absorption for the quarter was more than 60,000 square feet that became available at 400 Plaza Drive while nearly 100,000 square feet became available at 500 Plaza Drive. Earlier this year, the entire building (250,000 square feet) was listed at 200 Plaza Drive. As a result of these new large blocks hitting the market, availability in the submarket reached its highest level in more than seven years.

The report notes that several submarkets are seeing rents rising faster than the inflationary growth rate typical for most of the market. With the lowest availability rate in Northern New Jersey at 16.7%, Bergen Central saw asking rents for Class A space rise by 6.4% over the past year. In addition to low availability, building upgrades and new amenities, such as those recently completed at Glenpointe in Teaneck, are allowing landlords to start commanding higher rents, Newmark Knight Frank states.

Another area seeing strong rent growth is Newark, where Class A asking rents rose by 4.3% over the past year. Contributing to the rent growth, Downtown Newark is undergoing a revitalization exemplified by the recent completion of Ironside Newark. The development, which is an adaptive reuse of a former warehouse, added 270,000 square feet of new office space to the market in 2019. Meanwhile, the neighboring Gateway Center buildings are undergoing major renovations. These recent developments are helping to improve Newark’s image which is starting to give landlords more pricing power, the report states.