Office Market Shows New Life

In North Jersey, the overall vacancy rate held stable, currently in the 18.6% range, and leasing activity registered 6.7 million sf for 2005, an increase of 30%, according to C&W. The increase was led by financial firms picking up space on the Hudson River waterfront, but the performance was tempered a bit by some big blocks of space returning to the market. Notable among them were 332,000 sf from JP Morgan Chase at Newport Office Center VI in Jersey City, another 290,000 sf from Deutsche Bank at Mack-Cali's Harborside I, also in Jersey City, and AT&T's shedding of more than 475,000 sf at Kemble Plaza II in Morris Twp.

Investors continued in 2005 to like North Jersey office product, with nearly three dozen buildings of more than 100,000 sf trading. Major acquisitions included Mack-Cali's pick-up of both the1.2 million-sf 101 Hudson St. in Jersey City and the 279-sf 4,5,6 Century Dr. in Parsippany. And 2005 five saw some spec activity after a long drought, notably the Gale Co.'s new 175,000-sf building within the Center of Morris County, Parsippany.

In Central Jersey, heightened leasing activity of 5.4 million sf (up 25%) drove the vacancy rate down by more than a point to 19.5%. The market was highlighted by some very large deals, notably pharma giant Sanofi-aventis' commitment for 670,000 sf for its US headquarters at a former AT&T campus in Bridgewater, Verizon's acquisition of the 1.3 million-sf former AT&T headquarters campus in Basking Ridge, and Vonage's lease of a 358,000-sf former Prudential building in Holmdel. Mack-Cali bought the building from Pru and simultaneously signed Vonage to a full-building lease.

On the investment side, almost eight million sf changed hands in 2005, with portfolio sales dominating the market. In the most interesting deal, Allegiance Realty acquired a one million-sf portfolio in Franklin Twp. from Archon early in the year, then quickly flipped the properties to LaSalle Partners in December.