New York City, New Jersey Office Rents at Record Highs

Transwestern Commercial Services said office rents in the New York City and New Jersey markets reached record levels in the second quarter, with overall Manhattan rents topping $80 per square foot.

The company’s respective Second Quarter Office Market Reports said for the first time, average rent in Manhattan’s office market topped $80 per square foot, closing the second quarter at $80.37, in a strong reporting period that also saw 8.5 million square feet of leasing activity.

Across the Hudson River, TCS said the New Jersey office market recorded its fifth consecutive quarter of positive net absorption, driving the state’s average asking rent to a historical peak of $27.22 per square foot, marking the first time the average has ever exceeded $27 per square foot. Vacancy rates across the state have continued to improve, reaching a 10-year low.

TCS said FIRE (finance, insurance and real estate) sectors were key to the quarter in Manhattan, accounting for 37% of all leasing activity, with the co-working segment representing 10%. Year-to-date leasing activity stands at 15.5 million square feet, s down 9% from the same point last year but above the historical mid-year average of 14.8 million square feet.

“As we cross the mid-year point for 2019, we can see the signs for another strong year, with leasing activity well above the mid-year average,” said Danny Mangru, TCS Research Manager. “Meanwhile, we keep seeing new record highs for asking rents, while availability rates drop to points not seen several years. We expect the office leasing levels to continue for the remainder of the year, since we’re seeing activity across multiple industries, not only the hot FIRE sector and coworking segment.”

Additional highlights from the New York report (

–Office leasing activity totaled 8.5 million square feet, up 20% from last quarter.
–26 new leases exceeding 50,000 square feet were signed, including 10 that topped 100,000 square feet.
–1.3 million square feet of positive absorption marked the highest second-quarter figure since 2015.
–Manhattan’s availability rate fell to 10.5%, the lowest level since 2015.
–12 blocks of space exceeding 100,000 square feet were added to the market. Of those, nine are in Midtown, two are in Downtown and one is in Midtown South.

Meanwhile, the New Jersey report ( said multiple submarkets throughout the state are experiencing higher than 5% year-over-year growth in rents, including Woodbridge/Metropark, Edison South, Parsippany Region, Hudson Waterfront, Wayne/Paterson, Somerset/Interstate 78 East. Of the state’s 21 submarkets, 15 are experiencing higher rents year over year and compared to the previous quarter. Additionally, 13 of the 21 submarkets are experiencing occupancy levels higher than the state average.

“Continued demand for high-quality office space is supporting both successful repositioning of existing assets within prime locales and this cycle’s first speculative ground-up office development. These factors are putting upward pressure on overall market rents,” said Matthew McDonough, TCS Managing Director. “The steady success of the New Jersey commercial real estate market is encouraging investors to move forward with new development plans throughout the state, in both urban and suburban areas.”

TCS noted several major commercial real estate projects underway that indicate strong performance in both urban and suburban submarkets. These include the groundbreaking of Toll Brothers’ 1000 Maxwell Lane in Hoboken; 350,000 square feet of office space planned in Morristown by SJP Properties and Scotto Properties; and the Silverman Group’s plans for more than 100,000 square feet of office space above existing retail properties in Morristown.

The largest new leases were signed in the suburbs by life sciences companies including the IQVIA sublease for 115,000 square feet in the Somerset/I-78 East submarket and Genmab U.S. Inc. for 90,000 square feet in the Princeton submarket. Additional industries leasing commercial property in the suburbs during the quarter included law firms, professional services firms and healthcare companies, while government tenants were particularly active in Newark.

“The U.S. economy reached the longest expansion in U.S. history and at the same time, we’re seeing some remarkable trends and growth in the office sector,” said Matthew Dolly, New Jersey Research Director at TCS. “However, the Grow New Jersey tax credit program expired with no replacement and remained under scrutiny, which may pose some challenges to attracting and retaining businesses. The minimum wage increase could also impact hiring and potentially decelerate overall growth.”