Parsippany, N.J., July 15, 2016 - After a slow start to the year, northern and central New Jersey office leasing activity picked up during the second quarter, driven by major tenant recommitments and corporate relocations, according to Colliers International Group Inc. (NASDAQ: CIGI, TSX: CIG). The global commercial real estate services firm today released its mid-year 2016 Market Snapshots, which also show continued historic growth for the state's industrial sector, where tightening availabilities likely contributed to a slowdown in leasing velocity during the past three months.
Second-quarter office leasing, totaling 3.4 million square feet, was up 32 percent from last quarter and 10 percent from the five-year quarterly average, according to Colliers research. Northern New Jersey saw 2.2 million square feet in activity (an increase of 38 percent from last quarter), while tenant commitments totaled 1.2 million square feet in Central New Jersey (up 28.1 percent). The largest involved Daiichi Sankyo's 301,800-square-foot lease at 211 Mount Airy Road in Basking Ridge and Quest Diagnostics' 130,000-square-foot lease at 500 Plaza Drive in Secaucus.
"Despite strong activity, the office availability rate increased slightly to 20.8 percent as large blocks of space - including Citigroup's 661,736-square-foot space in Warren - returned to the market," noted Colliers' David A. Simon, SIOR, executive managing director and New Jersey market leader. "Additionally, the Bell Works re-development in Holmdel has added 700,000 square feet of inventory. However, more than half of that space is anticipated to be absorbed during the third quarter, as Somerset Development has leases out for two tenants totaling 370,000 square feet. Both were recently awarded Grow NJ state incentives to relocate their offices to the property."
Colliers also reported that overall office rental rate growth continued for the fifth consecutive quarter. Average asking rents are now at $26.19 per square foot, up 4.7 percent year over year. Rates remain higher in the northern counties, at $26.88 per square foot, compared to the central New Jersey average of $25.23 per square foot.
Although industrial leasing volume declined from last quarter's historic numbers, levels remained robust at 11.3 million square feet in tenant commitments and well above the five-year quarterly average of 10.1 million square feet. The most recent activity included major leases by Wayfair at 48-50 Station Road in Cranbury (two leases totaling 1.24 million square feet), Amazon at 698 Route 46 in Teterboro (616,992 square feet).
"At 29.9 million square feet, year-to-date industrial leasing activity already accounts for nearly three quarters of last year's total," noted John Obeid, senior director, Tri-State Suburban Research for Colliers. "Simply put, the market is experiencing incredible growth."
In fact, the industrial market has posted occupancy gains of 35 million square feet during the past six months, improving the availability rate from 11.5 percent to 7.5 percent. "With space availability at historical lows, developers continue to break ground on speculative construction projects in order to meet tenant demand - particularly from logistics and e-commerce companies," Obeid said. "Seven new projects totaling 2.2 million square feet broke ground during the second quarter of 2016, bringing the total construction pipeline to 28 projects totaling 6.3 million square feet."
Industrial landlords continue to be aggressive with their pricing, and the average asking rent increased for the ninth consecutive quarter, to $5.98 per square foot. According to Colliers, the asking rent for industrial space currently averages $6.49 per square foot in northern New Jersey and $5.26 per square foot in the state's central counties.
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