Manhattan, New Jersey Office Markets Show Strength
Manhattan’s office market shook off its “sluggish” early 2018 with a strong second quarter, reported Transwestern, Houston.
Northern New Jersey also saw a strong quarter as office rents in the Parsippany submarket and the Union/Parkway Corridor rebounded to near-record highs.
Manhattan recorded more than 10 million square feet of leasing during the period, the highest quarterly figure since 2014, with 22 new leases exceeding 50,000 square feet and nine that topped 100,000 square feet, Transwestern said. Nearly 300,000 square feet of positive absorption during the quarter brought the year-to-date total to negative 1.4 million square feet, but the market’s availability rate remained steady at 11.4 percent.
The “fairly robust” quarter brought the borough to 17 million square feet leased year-to-date, up 8 percent compared to the same period last year, Transwestern Research Manager Danny Mangru said. “The leases didn’t have a strong impact on the net absorption figure because much of the space was either preleased or was not officially on the market,” he said. “The TAMI [technology, advertising, media and information companies] and law sectors were the most active, accounting for more than half of the transactions exceeding 100,000 square feet.”
Mangru said average Manhattan asking rents reached a record $74.36, up 3 percent from a year ago. The average deal size of new leases grew to nearly 50,000 square feet, up 25 percent from last quarter.
Across the Hudson in New Jersey, the market experienced more than 500,000 square feet of positive absorption, pushing the vacancy rate from 15.3 percent in the first quarter to 15.0 percent at mid-year. Transwestern Managing Director Matthew McDonough noted 13 of 21 northern New Jersey submarkets saw positive net absorption and rents rose in 17 of those 21 submarkets. In Newark, average asking rents exceeded $30 per square foot for just the second time since 2001.
“As expected, deals that were in the market during the second half of 2017 have finally come to fruition and the New Jersey office market is poised to improve further as tenants that recently signed new leases take occupancy,” McDonough said. “Office landlords that are investing capital to create vibrant environments are being rewarded with increased activity, which has led to the influx of higher asking rents.”
Transwestern New Jersey Research Director Matthew Dolly said as the economy grows, many developers remain hopeful that millennials will return to the suburbs, “even if it is at a later age than that of past generations. (Economic development program) Grow New Jersey incentives are creating opportunities for the redevelopment and transformation of aging office product, which is having a profound effect on the state of the market, as evidenced by the large deals that were completed during the second quarter.”
