In the fourth quarter of 2019, the New Jersey office market experienced a 120-basis point drop in the vacancy rate since Q4 2018, going from 14.3 percent to 13.1 percent,while market rents rose $.13 year over year to $30.23 per square foot. Net absorption continued its hot streak, posting a positive number for the seventh-straight quarter.
Similarly, the state’s industrial sector vacancy rate also continued to drop as rents increased
The industrial vacancy rate dropped to 2.5 percent when compared to the fourth quarter of
2018 when it was 2.9 percent. Meanwhile,the historic ascent of market NNN rent has
continued its historic rise to $8.71 per square foot.
These are the major findings according to the Avison Young New Jersey Fourth Quarter 2019 Office and Industrial Sales Reports.
“Investors and tenants alike continue to view the New Jersey office and industrial markets in a positive light,” notes Jeff Heller, Principal and Managing Director of Avison Young New Jersey. “Overall fundamentals in both sectors are still strong and the outlook for 2020 remains on an upward trajectory.”
Office Sector Market Spotlight and Transactions
The report includes a market spotlight of the Warren market as a blueprint for the New Jersey office market in 2020. Much of the New Jersey office market can be described as “dated” with a lack of amenities. It was this line of thinking that inspired Vision Real Estate Partners and
Rubenstein Partners to upgrade Warren Corporate Center after they purchased it in 2016. The joint venture’s decision to invest in creating high-quality amenities is a case study of what New Jersey owners will need to consider doing in order to attract large tenants to their properties.
The report also highlights major office dealsover the previous quarter including:
- The Birch Group announced that it acquiredthe American Metro Center located inHamilton. The three-property, 488,429-square-foot office complex was sold by MeritageProperties for $84.7 million.
- 77 Corporate Drive in Bridgewater was soldfor $47.5 million by SeniorHousing Property Trust. The 205,439square-footproperty is part of a 300-acre office parkadjacent to Route 287.
- Welch’s Fruit Snacks’ makerPromotion in Motion leased 110,945 squarefeet at 225 Brae Boulevard in Park Ridge. The Class A property used to serveas the global headquarters for Hertz Corporation,prior to their relocationto Florida.
- Danish transport and logistics company, DSV Air & Seaannounced that they have leased 97,500 square feet at200 Wood Avenue South in Iselin.
Industrial Sector Market Spotlight and Transactions
The report also includes a spotlight of the Warren County market as a model of what smart industrial developers are doing to address the lack of land for further development. Over the past few years, the New Jersey industrial market has remained white-hot but the scarcity of available land for new construction isthe sector’s biggest concern.
Developers have been forced to look beyondthe usual locations of interstate 95 and route 287 to build. The Avison Young report spotlights Bridge Point 78 as a perfect example. The 380-acre, 6 building, 3.8 million-square-footdevelopmentis in Phillipsburgwithin Warren County and has been marketed as a cheaperalternative to other properties along Interstate 95,287 and the Lehigh Valley in Pennsylvania, with toll-free access to Port Newark.
Major industrial deals over the previous quarter highlighted include the following:
- Blackstone’s industrial subsidiary, Link Industrial Properties, made two of the largest industrial purchases in Q4 2019. In one transaction they purchased a two-property Linden portfolio from Penwood Real Estate Investment Management for $33.6 million. The two properties were 1501 West Blancke Street (115,935 SF) and 2401 East Linden Avenue (83,220 SF). In a second large purchase, Link purchased 7300 West Side Avenue in North Bergen for $22 million in a sale-leaseback with Bergen Logistics.
- In one of the largest lease transactions of thequarter, LG Electronics leased 926,392 squarefeet at the soon to be completed 50 VeronicaAvenue in Somerset. The electronicsmanufacturer signed a seven-year leasewith Crow HoldingsDevelopment whobroke ground on theproperty earlier in2019.
To read the full report, please click here.
Avison Young is the world’s fastest-growing commercial real estate services firm. Headquar-tered in Toronto, Canada, Avison Young is a collaborative, global firm owned and operated by its Principals. Founded in 1978, with legacies dating back more than 200 years, the company comprises approximately 5,000 real estate professionals in 120 offices in 20 countries. The firm’s experts provide value-added, client-centric investment sales, leasing, advisory, manage-ment and financing services to clients across the office, retail, industrial, and multi-family and hospitality sectors.
