Class B Space is Becoming the Hot Ticket

Tenants who can’t find the right top-line space for their needs, or who are waiting for class A space to come on the market, certainly aren’t standing still in New Jersey, especially if the class B absorption numbers are any indication. “They’re looking for class B space to meet their lease requirements,” according to Matt Dolly, director of research for the Sitar Co./ONCOR International, the real estate services company based in Iselin, NJ. “During the past three months alone, the net absorption of class B inventory is around the 700,000-sf mark. And that number comes on the heels of negative net absorption of almost 300,000 sf in the first quarter of this year.”

The sudden burst in B space seems logical given the fact that almost 1.3 million sf of class A space has been absorbed for the first half of this year in Northern and Central NJ. The grand total of some two million feet of net absorption for the year to date is a solid 27% increase over the 1.57 million sf that was absorbed in the first half of last year. These are indeed good times for both the economy in general and the real estate business in particular. The vacancy rate for office space has dropped to 10%; if the absorption rate continues, that number is expected to drop into single digits before the end of the year.

Middlesex, Monmouth and Somerset counties are particular hot spots for the class B phenomenon, according to Dolly. “In those three counties, net absorption over the last three months is about 472,000 sf, or about two-thirds of the total for the region. Monmouth has seen a number of mid-sized telecom and healthcare companies set up shop.

“In Middlesex, the class A activity has been mostly in the form of leases under 20,000 sf,” he continues. “The one major exception was SDC, Inc.’s 10-year lease for 133,000 sf in Piscataway.” Somerset County, meanwhile, has seen 150,000 sf of B absorption, mostly in small pieces. “Leasing activity just continues to sizzle,” Dolly concludes.