January 10, 2013
New Jersey Office Market to
Struggle in 2013
The Northern and
Central New Jersey office markets
faced added adversity in the fourth
quarter of 2012 as hurricane Sandy
and “fiscal cliff” trepidation both
made landfall. These recent
challenges, coupled with state
budget concerns, ongoing job growth
woes, and bitter interstate
competition will likely hold leasing
flat through at least the first half
of 2013, according to the Fourth
Quarter Northern and Central New
Jersey office leasing market report
from Colliers International New
Jersey.
The overall
average asking rent in Northern and
Central New Jersey for the fourth
quarter was $23.89/sf, down from
$24.23/sf the previous quarter and
$24.40/sf compared with fourth
quarter 2011. Leasing activity
slowed substantially in the fourth
quarter, registering just over 1.5
million square feet, which equates
to only 62 percent of the third
quarter total and just 55 percent of
the second quarter total.
Despite the
challenging quarter, net absorption
experienced a modest positive gain
of 329,243 square feet, wrapping up
the calendar year on a high note.
Though not a surefire indicator of
performance in the year to come, at
the very least, it propels the
market into 2013 with guarded
optimism.
“Potential
headwinds are on the horizon with
significant economic challenges to
be met in 2013 on the national stage
and state level,” said Robert Martie,
Executive Vice President of the
Colliers International New Jersey
region, who also noted that the
‘fiscal cliff,’ though averted in
some respects, kicks the can on
pressing issues such as the national
debt ceiling and scheduled
sequestration. “New Jersey faces a
tough fiscal road ahead, coming to
grips, with a $705 million budget
shortfall that has the possibility
of doubling by June. Under current
economic situations, market
indicators will likely struggle to
gain any upward momentum and remain
flat through the first half of
2013.”
The report did
reveal that the flight-to-quality
seen in recent quarters seems to
have reversed its course. Class A
leasing velocity, which had steadily
increased in market share compared
to total office leasing in the first
three quarters of the year, dropped
significantly in the fourth quarter,
to 48.4 percent, down from a yearly
high in the third quarter of 57
percent. This may point to an
emerging trend seen in the state;
the increasing focus on
redevelopment and re-fitting of
older stock. For many market
players, this is an encouraging
sign, reflecting the market’s
ability to adapt as the source of
demand evolves.
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