An uptick in leasing activity combined with diminished sublease space resulted in an improvement in New Jersey's office market in the first quarter—at least in terms of the direction it appears to be going in.
While the hole that needs to be filled remains large—an overall vacancy rate that ticked up slightly to 26.9% in Q1 2024—a Q4 2023 total of 579,000 square feet of negative net absorption retreated to minus 67,000 square feet in Q1, according to JLL's latest market report, which covers Northern and Central New Jersey.
If you look at the numbers for the two regions separately, the office picture looks much brighter in Northern NJ: the northern third of the Garden State notched more than 366K SF of positive net absorption, compared to a tally of negative 433,000 square feet in Central NJ.
Two submarkets in Bergen County—Bergen East and Bergen Central, both in close proximity to Manhattan—posted the lowest office vacancy rates in Northern NJ in Q1, at 15.9% and 12.7%, respectively.
The absorption tally in Northern NJ was boosted significantly by the largest lease signed in the region in Q1, Bank of America's 550K SF renewal and expansion at 525 Washington Boulevard in Jersey City.
The Hudson Waterfront led all submarkets in Northern NJ in net positive absorption, totally nearly 132K SF. The Lower 287 submarket in Central NJ fared the worst in net absorption, totaling minus 222K SF.
After corporate restructurings boosted Class A sublease space to nearly 8M SF at the end of Q2 2023, less than 6.9M SF is on the market for sublease nine months later, according to JLL's market report.
The Route 24 submarket in Northern NJ saw the largest decline in Class A sublease space in early 2024, including sublease deals of 72K SF and 29K SF in Morristown and Florham Park, respectively.
JLL reported a surge in active tenant requirements to nearly 4.9M SF in Q1, compared to 4.1M SF a year ago.
"Nearly 30% of these requirements spanned multiple submarkets, which suggested a strategy of prioritizing the quality of office product over a specific geography," JLL's report said.
"While leasing volume remained below pre-pandemic levels, additional tenant requirements could signal more companies are moving forward with their long-term workplace strategies," the report said.