February 14, 2013
Slow Economic
Recovery Continues to Impact New Jersey's Office and
Industrial Real Estate
New Jersey’s
office and industrial markets showed
an uptick in activity in 2012’s
fourth quarter, and while it wasn’t
enough to completely offset a
lackluster year in leasing and
investment activity, particularly in
the office sector, it did provide a
potential prelude to a better 2013.
However, both the 2012 performance
and the prospects for 2013 continued
to be tempered by an economy slow to
rebound.
“New Jersey’s
economic recovery remained
lackluster in 2012,” confirmed
Gualberto “Gil” Medina, executive
managing director of Cushman &
Wakefield, Inc. in New Jersey. “For
example, while the unemployment rate
edged downward in the fourth
quarter, it was still at 9.6
percent, well above the national
average of 7.7 percent.”
Modest job growth
has yet to generate substantial
space requirements for corporate New
Jersey. The job growth that has
occurred has been in the
professional and business services,
trade, transportation and utilities
sectors in Northern New Jersey, and
in the educational, health,
professional and business services
sectors in Central New Jersey,
according to the commercial real
estate services firm.
OFFICE UPDATE
Demand for office
space in Northern New Jersey did
increase in the fourth quarter of
2012, topping third quarter activity
by 44.2 percent, driven by the
financial, insurance and life
sciences industries, according to
Cushman & Wakefield. Bergen and
Morris counties experienced the
strongest performances.
For the full year,
however, demand trailed 2011 by 32.4
percent. “The total of 3.7 million
square feet leased year-to-date was
a 10-year low,” said Medina. “Large
firms have been less inclined to
spend capital on real estate costs
and, as a result, have opted to stay
in place. Renewals, totaling 2.9
million square feet, accounted for
almost 44 percent of all leasing
activity. Some of the larger
renewals have included PSE&G in
Newark, UBS in Weehawken and Morgan
Stanley in Jersey City.”
In Central New
Jersey, year-to-date leasing
activity trailed 2011 by 17.2
percent. “As in Northern New Jersey,
many firms decided to sit on the
sidelines,” said Medina.
“Significant corporate expansions
were scarce, with companies again
reluctant to spend capital on real
estate.”
INDUSTRIAL UPDATE
The past
year saw manufacturing continue to
struggle, but its impact on the
overall market was offset by gains
in warehousing/distribution, fueled
by rising retail sales. The result
for Northern and Central New Jersey
was modest leasing activity of 17.7
million square feet, according to
Cushman & Wakefield. That number was
down 24.4 percent from 2011 but
exceeded the five-year rolling
average.
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