MORRISTOWN, NJ–In its 2nd quarter look at the statewide office market, Avison Young sees the impact of state economic incentive programs at long last rippling out to stimulate the suburban markets.
AY reports the office vacancy rate increased slightly from the first quarter, to 21.3%, as corporate consolidations and vacated space narrowly outpaced leasing activity. Despite that, AY notes strong continuing demand for high-quality office space remained strong, nudging the average asking rent to $23.59 per square foot a $1.01 increase year-over-year.
The beefed-up incentives of the landmark New Jersey Economic Opportunity Act of 2013 have spurred companies to target large blocks of space that exist primarily in the suburbs, says AY in its new analysis.
“In a strengthening state economy and stabilizing office market, companies in New Jersey continue to take advantage of the unprecedented incentives offered under the latest legislation,” says Jeffrey Heller, principal and managing director for AY in the state. “Whereas activity in previous quarters was largely focused on the state’s urban centers, increased leasing in the suburbs during the second quarter clearly demonstrates the far-reaching effectiveness of these incentives.”
The state has seen high rates of population decline and fleeing businesses in past years, Heller notes, but he says the incentives programs have been effective in retaining and attracting new jobs. More than $4 billion in tax credits has been approved by the NJ Economic Development Authority since 2010.
While the greatest EOA incentive bonuses – for “mega-projects” – are available to urban centers and transit hubs, companies have recently begun targeting closer-in suburban areas, Heller says.
“Businesses continued to reassess their space needs to fit within an evolving workforce and technological landscape,” said Matthew Dolly, AY’s chief of research. “The EOA has been effective in counteracting consolidations and increased vacancies.”
Dolly adds in the report that recent studies have indicated that business owners are optimistic about near-term company growth and hiring.
State unemployment dipped to 6.8% for the quarter, a six-year low, Dolly notes. At the same time, AY cautions that that the regional economy is not expected to reach peak employment until 2018.
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