Office Market Snapshot Central New Jersey • Third Quarter • 2013 Market Tracker *Arrows = Current Qtr Trend Vacancy 14.6% Net Absorption 467,333 SF Deliveries 0 SF Asking Rent $23.65 SF Lowest Vacancy Rate In Over Four Years The Central New Jersey office market appears to be operating on all cylinders, as the vacancy rate dropped to its lowest level in 18 quarters, down 50 basis points from last quarter to 14.6 percent. An increase in leasing activity this year led to another 467,333 square feet of positive absorption in the third quarter. This brought the year-to-date total north of 1.1 million square feet of positive absorption, as tenant demand outpaced space returns during all three quarters in 2013. Class A space accounts for all of the positive absorption, as Class B space has posted negative 36,914 square feet of absorption. Five out of the seven submarkets posted decreases in the vacancy rate this quarter, as Monmouth County recorded a 160 basis point drop to 14.1 percent. Average asking rents remained relatively stable in the third quarter, with the biggest change occurring in the I-78 West submarket, which posted a $1.60 per square foot jump in rents to $18.44. CENTRAL NEW JERSEY OFFICE Economic Indicators Q3 13 Q3 12 1.257M 1.255M Central NJ** Unemployment 7.9% 9.5% U.S. Unemployment 7.2% 8.8% 80.83 75.11 Central NJ* Employment (Seasonally Adjusted) U.S. CCI (Quarterly Avg.) *Edison-New Brunswick/Trenton-Ewing (NJ BLS) **Hunterdon, Mercer, Middlesex, Monmouth, Ocean & Somerset Counties (NJ BLS) Net Absorption Square Feet ('000s) 1,600 1,100 600 100 -400 -900 -1,400 2008 2009 2010 2011 2012 2013 Vacancy Rates 16% Historical Average The momentum gained in the office market can be directly correlated with job growth over the past year. The New Jersey unemployment rate continued its downward trend and dropped to 8.5 percent in August, the lowest level since March 2009. The Central New Jersey area has outperformed the state as the unemployment rate dropped to 7.9 percent in August. In addition, the labor market continues to grow as the State of New Jersey gained 64,700 jobs year-over-year through August 2013. In the Central New Jersey area, trade, transportation and utilities was the leading industry sector for employment gains, with 6,700 jobs added for the trailing 12-month period through August 2013. During this same time period, the other biggest gainers were leisure and hospitality, adding 6,300 employees; education and health services, adding 5,200 jobs; and financial services, gaining 3,100 jobs. Leasing activity remained robust in the third quarter with numerous high profile transactions announced. Two of the largest transactions of the quarter were renewals as AT&T renewed 275,000 square feet at 30 Knightsbridge Road in Piscataway and URS Corporation renewed 234,160 square feet at 510 Carnegie Center in Princeton. Another notable significant transaction from the third quarter was Johnson & Johnson’s two-year extension for 112,184 square feet at 23 Orchard Road. The Woodbridge/Edison submarket had a rush of leasing activity for mid-sized firms, as two notable leases were signed. Real Estate Mortgage Networks leased 50,258 square feet at 194 Wood Avenue South for 10 years. At 270 Davidson Avenue, J. Knipper & Co., Inc., a healthcare company, leased 45,352 square feet. In addition, the law firm of Hill Wallack, LLP leased 43,500 square feet at 19 Roszel Road in Princeton. Investment activity was solid in the third quarter as another $207.5 million in volume was traded. This brought the year-to-date office investment activity to $658.5 million, for an average price per square foot of $122. The most notable investment this quarter was the purchase of three buildings in the Merrill Lynch Hopewell Campus by American Real Estate Partners for $90 million, or $239 per square foot. Forecast 14% • Expect the Central New Jersey market to end 2013 on a high note as leasing activity remains at a recent high 12% • The healthcare industry has recorded the largest gains in employment since 2009, which will continue to create demand for medical office space 10% 2008 2009 2010 2011 2012 2013 • Concession packages offered have stabilized, and will likely tighten in 2014 www.cassidyturley.com Cassidy Turley Office Market Snapshot Central New Jersey • Third Quarter • 2013 TOTAL BLDGS INVENTORY SUBLET VACANT TOTAL VACANT VACANCY RATE CURRENT NET ABSORPTION YTD NET ABSORPTION Brunswick/Piscataway/I-287 275 18,418,948 243,433 3,910,135 21.2% 151,956 168,765 $21.23 I-78 West 63 2,445,900 0 507,982 20.8% (15,130) 60,196 $18.44 Monmouth County 389 15,547,761 48,574 2,196,652 14.1% 247,948 310,089 Ocean County 135 3,766,454 7,175 351,586 9.3% (27,012) 12,481 UNDER CONSTRUCTION AVERAGE ASKING RATE Featured Submarkets 20,525 $22.18 $21.94 145,274 $25.55 Princeton Area 517 34,901,849 214,234 4,237,397 12.1% 29,868 411,164 Somerset/I-78 205 22,793,375 209,935 2,835,525 12.4% 119,370 161,440 $24.05 Woodbridge/Edison 120 9,378,430 45,496 1,636,824 17.5% 62,120 132,653 $25.80 Class A 414 60,190,455 432,479 9,008,711 15.0% 569,640 1,143,566 145,274 $26.07 Class B 1,256 44,130,682 321,872 6,218,675 14.1% (102,307) (36,914) 20,525 $20.54 CENTRAL NJ TOTAL 1,670 104,321,137 754,351 15,227,386 14.6% 467,333 1,106,652 165,799 $23.65 Central NJ Market Totals * Market statistics may vary from previous quarter as submarkets were reevaluated and updated for accuracy Office Submarkets Central New Jersey Key Lease Transactions Q3 13 PROPERTY SIZE (SF) TENANT TRANSACTION TYPE SUBMARKET 30 Knightsbridge Road 275,000 AT&T Renewal Brunswick/Piscataway/ I-287 23 Orchard Road 112,184 Johnson & Johnson Extension Princeton Area 194 Wood Avenue South 50,258 Real Estate Mortgage Networks Direct Woodbridge/Edison 270 Davidson Avenue 45,352 J. Knipper & Co. Inc. Direct Woodbridge/Edison 19 Roszel Road 43,500 Hill Wallack, LLP Direct Princeton Area 184 Liberty Corner Road 40,394 Fiserv International Solutions Direct Somerset/I-78 Key Sales Transactions Q3 13 PROPERTY SIZE (SF) SELLER/BUYER PRICE SUBMARKET 1200 Merrill Lynch Drive 380,417 FIG LLC/American Real Estate Partners Management, LLC. $90,815,000 Princeton Area 30 Independence Boulevard 210,560 Beacon Capital Partners/ Griffin Capital Essential Asset $40,000,000 Somerset/I-78 106 Allen Road 133,684 Mack-Cali Realty Corporation/ The Silverman Group $18,000,00 Somerset/I-78 1. 2. 3. 4. 5. 6. 7. Brunswick / Piscataway / I-287 I-78 West Monmouth County Ocean County Princeton Area Somerset / I-78 Woodbridge / Edison Raymond P. Trevisan Managing Principal Liliya Magid Research Analyst About Cassidy Turley Cassidy Turley is a leading commercial real estate services provider with more than 3,800 professionals in more than 60 offices nationwide. With headquarters in Washington, DC, the company represents a wide range of clients—from small businesses to Fortune 500 companies, from local non-profits to major institutions. The firm completed transactions valued at $22 billion in 2012, manages approximately 400 million square feet on behalf of institutional, corporate and private clients and supports more than 23,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full spectrum of integrated commercial real estate services—including capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. Cassidy Turley enhances its global service delivery outside North America through a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit www.cassidyturley.com for more information about Cassidy Turley. 26 Main Street Suite 202 Chatham, NJ 07028 T 973.908.6100 The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy. Copyright © 2013 Cassidy Turley. All rights reserved. www.cassidyturley.com