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NEWS: Avison Young New Jersey releases Q2 2020 Office and Industrial Sector Reports

August 7, 2020

New Jersey – The New Jersey office vacancy rates fell year-over-year with a 70-basis point drop since the second quarter of 2019, as the sector waits to see what effects the coronavirus has on the market.  Meanwhile, the industrial sector remains strong as e-commerce strengthens its grip on retail. 

These are the major findings of the Avison Young New Jersey Q2 2020 office and industrial sector reports.

“Historically real estate usually trails the economy in a time of recession so we will see what effects COVID-19 has on the New Jersey office market over the next few quarters,” noted Jeff Heller Principal and Managing Director of the Avison Young New Jersey office. “However early indications are that e-commerce has bucked the trend and increased its grip on the future of retail, resulting in the strengthening of an already strong industrial market.”

Office Sector:

Vacancy rate dropped from 13.4 percent in Q2 2019 to 12.7 percent this year, but also saw a 20-basis point jump from the first quarter of this year. Market rents rose $.34 year over year to $30.56 per square foot and net absorption continued its hot streak, posting a positive number for the ninth-straight quarter.

There were several major office transactions over the last quarter, including the following:

  • One of the largest deals of the quarter was the New Jersey Resources 157,511 square foot renewal at 1415 Wyckoff Road in Wall. The energy services holding company signed a fifteen-year lease to maintain their presence at their headquarters in Wall, where they occupy the entire building.
  • In another major renewal this quarter, McCarter & English signed a ten-year extension at 117,300 square foot location at 4 Gateway in Newark.
  • In one of the largest sale transactions of the quarter, Lincoln Equities Group and H.I.G. Realty Partners purchased the former Bristol-Myers Squibb campus in Hopewell. The 1.2 million square feet of office, flex, and lab space sits on over 433 acres and includes

PTC Therapeutics as its main tenant.

  • In their second large purchase of the year, Opal Holdings purchased 1100, 1150 and 1200 American Boulevard in Pennington. The 380,417 square foot complex is fully occupied by Merrill Lynch, who currently has a lease in place through November 2024.

The Future of the Office Sector:

As offices begin to reopen, the question remains on what value do they bring. While for the most part warehouses have remained open during the pandemic, most office buildings have remained closed. Companies and landlords are tasked with coming with a plan to keep their employees and tenants safe.

Landlords are taking numerous steps to help keep their tenants feeling safe including limiting the number of people in the elevator, upgrading their HVAC systems, providing more maintenance staff, mandating face-covering in public spaces, and providing hand sanitizer dispensers among other things.

As companies continue to return from COVID-19, the value of the office will be discussed and examined in nearly every boardroom across the country. Landlords will be forced to reimagine how they will develop and market their buildings to demonstrate the value their properties can provide to their tenants and their workforce.

Industrial Sector

The New Jersey industrial sector vacancy rate dropped to 2.8 percent compared to the first quarter of 2019 when it was 3.1 percent, while the historic ascent of industrial market rent has continued its rise to $8.96 per square foot net. E-commerce continues to drive retail which in turn boosts the already strong industrial market. The next few quarters will be important as we get a clearer picture of the effects the virus has on the New Jersey industrial market.

There were several key industrial sector transactions over the last quarter, including:

  • Amazon, the world leader in e-commerce, finalized a slew of leases in New Jersey during the second quarter, further demonstrating their belief that New Jersey's central location remains essential for servicing its customers in the Northeast. Deals were closed at the following locations:
    • Alfieri’s 343 Half Acre Road in Cranbury (953,595 SF)
    • Centerpoint’s 1800 Lower Road in Linden (386,296 SF)
    • Prologis’ 8-B Court South in Edison (289,698 SF)
    • Duke Realty’s 1 Paddock Street in Avenel (185,017 SF)
    • RTC Properties’ 5 Logistics Drive in Kearny (181,440 SF)
    • Brookfield’s 10 Patton Drive in West Caldwell (167,894 SF)
    • Black Creek’s 5 Paddock Street in Avenel (156,307 SF)
    • CT Realty Investors’ 79 Thomas McGovern Drive in Jersey City (95,808 SF)
  • Mark Anthony Brewing Inc. signed a seven-year, 419,460-square--foot lease at Bridge Development Partners’ Bridge Point 78 in Phillipsburg, joining clothing retailer Uniqlo at the six-warehouse, 3.85 million square-foot industrial campus.

The Future of the Industrial Sector:

While the industrial market has seemingly not missed a beat as a result of the pandemic, with e-commerce taking on a larger role in the retail space, there have been and will be few changes occurring both in the short and long term.

The first is the size of the space available. While the pandemic has been a boon for many big-box retailers, many small to medium size users of industrial space were affected negatively, forcing many of them to leave their space. This has resulted in an uptick of available space 50,000 square feet and less. Eighty-one percent of space that has come to the market since February has been less than 50,000 square feet, compared to sixty-seven percent of the space that has been marketed as available before February.

The second trend having both a short-term and long-term effect on the industrial market is an emphasis on reverse logistics - the part of the supply chain that handles merchandise returns. The increased rise in e-commerce has caused this part of the supply chain to receive more attention from companies. In the short-term, there is an expected increase in returns with many consumers returning merchandise that they could not because of store closures during COVID-19. In the long-term reverse logistics is expected to continue to play a larger role in companies’ supply chain.

While this emphasis on issues like reverse logistics did not just appear during the COVID-19 pandemic, like many of the changes happening in the industrial marketplace, it was just accelerated. It has forced decisions to be made on employment, training, safety, and real estate among others a lot quicker than most experts expected it to be.

To read the full report, please click HERE.

Avison Young is the world’s fastest-growing commercial real estate services firm. Headquartered 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 thousands of real estate professionals in more than 100 offices around the world. The firm’s experts provide value-added, client-centric investment sales, leasing, advisory, management and financing services to clients across the office, retail, industrial, multi-family and hospitality sectors.

Media Contacts:

Wendy Lusardi, Marketing Manager, New Jersey
Avison Young
[email protected]
973.898.4009 - direct


Tom Nolan | Great Ink Communications
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