MARLTON, NJ—The Southern New Jersey commercial real estate market has shifted into high gear, with new leases and renewals running about three times higher than last year, according to a second quarter market analysis produced by Wolf CRE, a South Jersey broker.
During the second quarter, several large renewals and new leases were completed, planned relocations and developments were announced, and GROW NJ tax incentives drew yet more interest in Camden.
“This has been another quarter marked by business expansion and improving job growth,” says Jason Wolf, founder and managing principal of WCRE. “The tone in our region continues to be optimistic, shored up by increasing demand, and a lending climate that remains favorable.”
WCRE’s report notes that several major companies are planning relocations, including New Jersey American Water and Subaru, and addresses concerns about the vacancies relocating companies will leave behind. It also examines ongoing REIT repositioning, and an influx of demand for office space from investors based outside the region.
In the second quarter, there were about 1.04 million square feet of new leases and renewals executed, more than triple the total square feet of transactions that closed during the second quarter a year ago, WCRE says.
Several large transactions contributed to this spike in deal activity. New tenant leases totaled 289,432 square feet, and renewals and expansions were 749,369 square feet. New leasing activity represented about 27.9 percent of all deals for the first quarter. Overall, gross absorption for Q2 is in the range of about 250,000 square feet. In addition to the consummated deals, there is a pipeline of about 250,000 square feet of significant pending lease deals expected to close in the near term.
Other office market highlights from the report:
- Overall vacancy in the market continues to drop, and is now down to approximately 12.9 percent, an improvement of more than half a point over the previous quarter.
- Average rents for class A & B product continue to show strong support in the range of $10-$14 per square foot on a triple-net basis, or $21-$24 per square foot gross, with an overall market average showing strong support in the $10-$13 per square foot triple-net, or $20-$23 per square foot gross for the deals completed during the quarter. Rents have remained stable.
- All of the major private owners and REITS showed moderate leasing and prospect activity for the quarter – with Burlington County vacancies tightening up, many larger vacancy opportunities are also shifting towards Camden County, which is not controlled by these ownership entities.
- Enticed by low interest rates that make the cost of ownership more attractive than leasing, many mid-size businesses are acquiring properties and becoming owner-occupants.
WCRE also sees an improving job market and lending environment contributing to a retail development renaissance, bringing new restaurants, healthcare facilities, banks, and stores to many of the major markets across the Philadelphia-Southern New Jersey region.
“Retail sales, consumer confidence, and employment figures are all on an upswing, and all of these factors have positively influenced the retail CRE market in Philadelphia and South Jersey,” says Leor Hemo, executive vice president of WCRE.
Overall retail vacancy in the tri-county area is hovering around 10.5 percent, unchanged from the first quarter, but is still encouraging compared to recent years.
Class A retail product rental rates continue to show strong support in the range of $30-$40 square foot triple net, as rents have remained stable.