NJ Office Market Called 'Phenomenal' and 'Frustrating'

Office property owners in New Jersey have never seen anything like it. Prices are rising (to their delight), and almost anything they do, from repositioning and renovation to new construction, is working. Corporate NJ has a different take: for them, the right space is hard to find and they’re increasingly being priced out, forced to accept something less than ideal.

“The strength of the economy is creating an unprecedented level of demand,” according to Donald P. Eisen, executive managing director for the metro area for Cushman & Wakefield who is based in the company’s East Rutherford, NJ offices. Reflecting on his firm’s new first-half of 2000 market report, Eisen notes that, in particular, “Jersey City and Newark are being revitalized by significant investment.”

Among the market trends: Jersey City, sometimes called New York’s 6th borough or Wall Street West, is seeing a blast of new construction to satisfy demand. Newark, meanwhile, is parlaying its extensive fiber-optics network and older, underutilized building stock to increasingly attract e-commerce, telecom and engineering firms.

Overall, according to Eisen, new construction has put more than 1.5 million sf of new office product on the market in just the first six months of the year, and as much as 5.4 million sf more is on the drawing boards or under construction. At the same time, heavy demand has driven vacancies into single digits, with the tightest markets in Hudson and Monmouth counties. After several years of being quiet, the I-78 corridor has turned up the gas again, and the Princeton market remains among the tightest, with several new projects slated.

Another indicator of the market’s strength is portfolio turnover. Numerous properties have changed hands, including two large portfolio sales. In the first, Crow Holdings and Invesco took seven buildings from Lincoln Equities; in the second, a half-dozen buildings went from Gale & Wentworth to JP Morgan.