Office Vacancies on the Rise ; Unoccupied Space Up 0.1% in 2nd Quarter
North Jersey’s office market worsened slightly in the second quarter, as the financial sector reduced its need for office space, further underscoring the decline in the economy.
The vacancy rate rose to 18.4 percent in the second quarter for 94.2 million square feet that was available for renting or subleasing. That was up 0.1 percent from the previous three-month period, according to research by Grubb & Ellis, a national commercial real estate firm.
The unoccupied space is seen as a sign that companies faced with sluggish retail sales and a distressed financial sector reduced the need for office space.
North Jersey has seen more space available for subleasing in particular, said Stephen Jenco, a vice president and client services manager for Grubb & Ellis in New Jersey.
“That’s really telling us that companies are starting to consolidate,” he said. “An economy may be in a recession for several quarters and it may not reflect in the real estate market, possibly, for another maybe another six or nine months” after companies cut departments, lay off workers and then shed assets like real estate, he added.
New Jersey’s unemployment rate in June was at 5.3 percent, below the national rate of 5.5 percent, according to the state Department of Labor and Workforce Development. However, the state has lost 14,100 jobs so far this year.
The economic slowdown has put more Class A office space on the market. In the second quarter, 19 percent of North Jersey’s Class A space generally pricier and more prestigious was available for rent. That’s the highest Class A availability rate since early 2007, when the rate was just under 20 percent, Grubb & Ellis said.
Vacancies were lifted in North Jersey by 290,000 square feet of space going on the Hudson Waterfront submarket.
In Jersey City, reshufflings at Bank of America led to 155,300 square feet of space being put on the market for sublease, according to Grubb & Ellis. Also, Moody’s Investors Service put more than 91,300 square feet of office space up for sublease at Harborside Financial Center.
A greater amount of Class A space has led companies to upgrade from Class B space, Jenco said. While Grubb & Ellis saw the price for Class A space $28.50 per square foot (with electricity) remain relatively constant, companies were apparently sweetening the deals with free rent.
More space for rent
Availability rates for Class A, B and C office space combined in North Jersey:
2007 1Q 19.1%
2007 2Q 17.9%
2007 3Q 18.6%
2007 4Q 18.1%
2008 1Q 18.3%
2008 2Q 18.4%
Source: Grubb & Ellis
(c) 2008 Record, The; Bergen County, N.J.. Provided by ProQuest Information and Learning. All rights Reserved.