The office real estate market continues to struggle, but industrial real estate remains popular, according to Colliers.



Real estate firm Colliers released a couple of second quarter New Jersey real estate reports and the results are what you might expect:

While the office sector is still grappling with the effects of the pandemic, the industrial sector remained active in the second quarter.

Office market

Colliers reports that leasing activity reached 2.28 million square feet this quarter, up from 1.96 million square feet in the first quarter and 1.23 million square feet in the second quarter of 2020.

“As New Jersey begins to recover from the pandemic and employees are slowly returning to the office, the number of new available blocks of space has declined in the last month of the second quarter,” the report said. “However, the uncertainty has led to the return of surplus sublease space to the market.”

However, Colliers noted some major challenges, as renewable jobs accounted for more than half of the demand, accounting for 50.1% of total activity during the quarter, up from 22.9% in the second quarter of 2019.

“The New Jersey office market began to show the first signs of recovery in the second quarter of 2021,” Colliers New Jersey Research Director John Obeid told ROI-NJ. “However, the market is currently under pressure from several large blocks of vacant space, and this trend has been exacerbated by the pandemic. The recovery trajectory will depend on the recovery of non-performing assets, as well as the decisions major tenants make about their future office space needs. Large tenants such as Atlantic Health System and WebMD signed significant leases this quarter, highlighting the trend that many office tenants are back on the market and are ready to do so in the coming months. ”

Colliers said sublet area currently accounts for 17.2% of the total available area, the highest since the 2009 global financial crisis. However, the area available on a direct basis remains stable at 18.8%, which Colliers said suggests that oversupply has boosted the market as the pandemic peaked.

Availability was 22.7%, up from 22.2% in the first quarter and 19.3% in the second quarter of 2020. Colliers said the increase was due to an 8.5 million square feet loss in occupancy over the past 18 months, a jump from 18.6% in the previous quarter. first quarter of 2020, before the pandemic.

Meanwhile, asking rent reached $ 28.90 per square foot, up from $ 28.86 in the first quarter and $ 28.59 in the second quarter of 2020.

Industrial market

Leasing activity was 13.37 million square feet for the quarter, up from 15.71 million square feet in the first quarter but up from 10.19 million square feet in the second quarter of 2020.

Colliers noted that the activity was driven by demand for Class A products, with nine of the top 10 transactions occurring in these types of properties.

“At 7.2 million square feet, Class A leasing accounts for 53.7% of total activity, which is remarkable given that the Class A property group only accounts for 20% of total inventory,” the Colliers report says. “The growth in demand for users of e-commerce and logistics amounted to 51.3% of the total leasing volume. … With consumer behavior shifting towards more e-commerce shopping, the race to find manufacturing space to store and deliver groceries has intensified in the first half of 2021 and is expected to remain strong throughout the rest of the year. ”

Availability dropped to 3.4% from 4.1% in the first quarter and 4.5% in the second quarter of 2020. Net absorption remained positive for 34 for the quarter in a row, Colliers hit a five-year high of 5.8 million square feet. The firm added that this helped to constrain the supply and prompted developers to start new projects at record speed.

“New Jersey’s industrial market experienced unrelenting demand during the pandemic, resulting in record high prices and consistently low levels of availability,” Obaid said. “A wave of new construction work, coupled with strong tenant activity, could drive rental rates higher while keeping affordability at an all-time low.”

The average asking rent was $ 10.36 per square foot, up from $ 10.05 in the first quarter and $ 9.07 in the second quarter of 2020.


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