New Jersey office market
Avison Young’s third-quarter 2018 office-market report shows that the
Garden State’s vacancy rate of 15 percent and average asking rent of
$27.51 per square foot were virtually unchanged year over year. The report states that a gasoline-tax increase that went into effect this past
October may impact commercial real estate by increasing shipping
costs for industrial tenants and shifting more office tenants closer to
The Wall Street Journal reported that New Jersey posted its lowest
office-vacancy rate in nine years during first-quarter 2018, but that was
largely due to inventory declines. About 1.7 million square feet of office
space — much of it Class B space in the northern market of Parsippa-ny — is being redeveloped. Tenants appear to be moving away from
outdated, suburban office parks and toward Class A space near mass
transit, retail, restaurants and other amenities.
What the locals say
“New Jersey is within 24 hours of one-third of the country’s
population, and businesses are experiencing steady demand
along with the recent tax cuts. As such, warehouse properties
are enjoying strong demand, not only for last-mile distribution centers, but as spacious, easily accessible places to collect
materials and inventory, work and ship out product. … Class B
and Class C multifamily properties offer clean, affordable
places to live. Vacancy [rates] continue to be below 5 percent
at these properties and rents are rising, with no concessions
By Neil Pierson
The Garden State is enduring a bumpy ride.
What is now New Jersey was originally inhabited by the Delaware tribe of
Native Americans more than 10,000 years ago, and it was colonized in the
1600s by Dutch, Swedish and Finnish settlers. Following the Civil War, New
Jersey was a hotbed for the Industrial Revolution and further immigration
growth. The Garden State (New Jersey’s nickname) rebounded from the
Great Depression by becoming a hub for electronics and chemical manufacturing during World War II.
Today, the Garden State has a robust economy fueled by several industries,
including pharmaceuticals and life sciences, financial services, advanced
manufacturing, information technology, and transportation and logistics.
About 15 percent of the state’s population is 65 or older, driving demand
for health care services. New Jersey is the home base for pharmaceutical
giants such as Bayer Corp., Johnson & Johnson, and Merck & Co.
Although its post-recession recovery has lagged behind neighboring New
York, figures from the Federal Reserve Bank of New York show the Garden
State’s economy expanded by 4 percent year over year as of this past July,
an 18-year high mark for growth. New Jersey’s median household income
increased to $80,088 in 2017, nearly $20,000 higher than the nationwide
median income, according to the U. S. Census Bureau. Median wages dipped
slightly from 2016 to 2017, however, and about 10 percent of the state’s residents live below the federal poverty line, a share that has grown since 2008.
Gov. Phil Murphy has voiced concerns about the state’s future, noting that
New Jersey retains a relatively low percentage of its college graduates as
workers, and its pension and health-benefits liabilities for public workers
stand at $150 billion, nearly four times higher than the state budget.
By 2025, Murphy plans to add 400,000 jobs in New Jersey, increase its
venture-capital investments by $625 million and reduce the poverty rates
in the state’s largest cities.
As of this past September, New Jersey’s largest employment sectors were
trade, transportation and utilities; education and health services; and professional and business services, the U.S. Department of Labor reported.
New Jersey’s fastest-growing employment sector at that time was leisure
and hospitality (up 2.7 percent year over year). The construction sector,
however, lost 6.1 percent of its workforce.
Avison Young, a commercial real estate services company, reported that
New Jersey’s industrial-property vacancy rate declined from 4 percent to
3. 4 percent year over year in third-quarter 2018. The company also reported
that retail-property vacancy rates decreased from 5. 3 percent to 4. 9 percent
during the same 12-month period. n Michael Claisse
Senior vice president, Spencer Savings Bank
New Jersey Office Market
Source: Avison Young
Average asking rent
per square foot
Total vacancy rate