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Cushman & Wakefield Reports Increased Second Quarter Real Estate Activity
Growing Job Market Confidence providing Fuel for Office and Industrial Sectors
“Increasingly positive trends are emerging in New Jersey’s economy, including growing confidence in employment, and that is impacting real estate activity,” said Gualberto “Gil” Medina, New Jersey executive managing director. “Employers added 17,600 jobs in May, and predictions are for continued job growth.”
Second quarter leasing activity in Northern New Jersey was off 27.8 percent from the same period of 2011, but the recent quarter was marked by an increase in activity over the first quarter, a trend that is expected to continue. In contrast, Central New Jersey leasing activity was off a slight 1.5 percent year over year and, like Northern New Jersey, is showing growing momentum.
Northern activity was dominated by FIRE corporations in the Hudson Waterfront submarket. There, The Bank of Tokyo-Mitsubishi UFJ expanded by 100,274 square feet at Harborside Financial Center III; Citigroup leased 92,554 square feet at Newport Office Center VII, and Tower Insurance leased 76,892 square feet at Harborside Financial Center II. Largest leases away from the waterfront included Xerox’s 69,800-square-
Central New Jersey saw a total of nearly 1.65 million square feet of leasing activity for the quarter, dominated by technology and pharmaceutical companies along the I-78 corridor. Largest leases were United Healthcare’s 106,000-square-
Investment sales activity in both regions, as well, rebounded from a slow first quarter. In Northern New Jersey, Bayer Corp. purchased the 600,000-square-
Investment sales in Central New Jersey were topped by the $107.8 million acquisition of the 1.8 million-square-
Despite the activity, market fundamentals remain flat across the region. In Northern New Jersey, vacancies for all classes rose 0.6 percentage points year over year to 17.9 percent, although class A vacancies dropped 0.2 points from the first quarter to the second quarter. Direct average asking rents for all classes fell $0.09 per square foot year over year to $25.92, while average asking rents for top class A product rose $0.12 per square foot to $28.82.
In Central New Jersey, leasing activity pushed overall vacancies down a full point year over year to 19.4 percent. Asking rents are gradually rising, with direct average rates for class A product up 5.8 percent year over year to $25.64 per square foot.
“For the second half of 2012, we anticipate that activity will continue to pick up, although that might not necessarily be reflected in market fundamentals,”
Despite a number of major transactions, including 30 warehouse/distribution transactions of more than 100,000 square feet, industrial leasing for the first half of 2011 in Northern and Central New Jersey experienced a 17.3 percent year-over-year decrease from 2011’s robust activity. Of those 30 transactions, 17 took place in the recently completed second quarter as region-wide activity did gain momentum in the quarter.
The largest of those 17 transactions was an 886,826-square-
Sales activity maintained a steady pace in the second quarter. The largest transactions were Centerpoint Properties’ acquisition of both the 256,125-square-
At the end of the second quarter, the New Jersey industrial market’s vacancy had fallen 0.4 percentage points to 9.2 percent. The most dramatic improvement has come in southern Mercer County’s Exit 7A submarket, where vacancy has fallen from its 2009 peak of more than 30 percent to its current 14.4 percent.
After holding steady since mid-year 2011, the statewide direct average asking rental rate rose $0.08 per square foot in the second quarter to its current $5.70. Largest increases have occurred in the Meadowlands (up 2.4 percent to $5.98 per square foot) and the Port Region (up 2.5 percent to $5.36 per square foot).
“We believe that New Jersey’s industrial market fundamentals will continue to slowly improve throughout the remainder of 2012,” said Medina. “Leasing activity is expected to remain strong, although it is not likely to approach what we saw in 2011. Vacancy rates can be expected to continue to fall, based on a combination of heightened leasing activity and little new product coming onto the market. Asking rents will rise as a result of the increasing demand for existing product.”