RESEARCH

NORTHERN NEW JERSEY

3Q17 OFFICE MARKET

INCENTIVES FUEL TECH Current Conditions

EXPANSION Availability in the Northern New Jersey office market

Technology firms are expanding throughout Northern and Central New
Jersey with the help of state economic development incentives, while major
pharmaceutical companies continue to shed office space. During the third
quarter of 2017, availability increased by 20 basis points to 23.1%, driven by
251,603 square feet of negative net absorption. The average asking rent
equates to $28.59/SF, up from $28.24/SF at the end of the prior quarter.
increased from 22.9% to 23.1% during third-quarter 2017.
The largest new deals for the quarter involved growing
technology firms.
Big pharma mergers and acquisitions continue to drive office
space dispositions, putting upward pressure on availability.

Fintech Firm Grows in Princeton

Availability in the Princeton submarket fell from 20.4% to 19.7% during third-
Market Analysis
quarter 2017, aided by 114,353 square feet of net absorption. Billtrust, a
Asking Rent and Availability
financial technology firm, leased 88,759 square feet for its new corporate
headquarters at 1009 Lenox Drive in Lawrenceville, in what was the largest $30 30%
new lease of the quarter. Billtrust is currently based at American Metro $28 25%
Center in Hamilton and is receiving a $12.9 million Grow NJ award to keep
$26 20%
228 jobs in the state and create 200 new jobs. The technology companys
relocation is part of a flight-to-quality trend, as 1009 Lenox Drive features $24 15%
extensive amenities, including a full-service caf, fitness center, volleyball
$22 10%
court and walking trails that connect to the Delaware and Raritan Canal
State Park. The property, which offered the largest available block of Class $20 5%
3Q07 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17
A space along I-95 in the Princeton area, also provides five parking spaces
Average Asking Rent (Price/SF) Availability (%)
per 1,000 square feet.
Net Absorption
Biotech Startup Crosses Hudson Square Feet, Millions
Currently based at the Brooklyn Army Terminal, Modern Meadow was lured 3
across the Hudson River with a $32.0 million incentive package from the
2
state. The biotech company landed 72,900 square feet at ON3, the
rebranded former Roche campus in Nutley. Modern Meadow, which 1
designs, grows and assembles collagen protein to produce leather
-1
materials without live animals, is bringing an estimated 263 jobs to
New Jersey. -2

-3
Roche, which had once employed nearly 10,000 workers, moved its sales 3Q07 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17
and marketing operations to San Francisco after acquiring Genentech in
2009 and completely shut down its Nutley site four years later. Prism
Capital Partners acquired the pharmaceutical giants 116-acre former North
Market Summary
American headquarters last year. Subsequently, Seton Hall University and
Hackensack Meridian health agreed to lease two buildings and 16 acres to Current Prior Year Ago 12 Month
serve as the campus for their joint medical school. Prism plans to create a Quarter Quarter Period Forecast
live-work-play environment at ON3 by adding mixed-use development to the Total Inventory 168.7M 168.9M 170.1M
campus, which will augment its appeal.
Availability Rate 23.1% 22.9% 22.2%
The Hudson Waterfront also saw expansions of technology companies Quarterly Net Absorption -251,603 119,814 1,410,190
aided by state incentives. Jet.com received a $25.8 million Grow NJ award Average Asking Rent $28.59 $28.24 $27.17
to create 322 new jobs and expand its existing offices at 221 River in
Under Construction 769,929 769,929 197,000
Hoboken by 39,990 square feet. Nuts.com also received a $3.1 million
Deliveries 0 0 185,000
Grow NJ award to lease 24,372 square feet at 10 Exchange Place and
create 150 new jobs.
RESEARCH
NORTHERN NEW JERSEY
3Q17 OFFICE MARKET

Availability Rises in Bridgewater Mack-Cali Sells Bergen Assets

The I-287/Route 22 submarket saw 410,482 square feet of negative net
absorption during third-quarter 2017, which pushed availability up from
21.7% to 28.9%. Big pharma industry mergers and acquisitions are
largely responsible. Lilly, LifeCell and Impax Laboratories are giving up
large blocks of space at 440 Route 22 East, 95 Corporate Drive and
Somerset Corporate Center I. Lilly had acquired CoLucid
Pharmaceuticals earlier this year for $960 million, and LifeCell was
recently acquired by Allergan for $2.9 billion.
Last year, Mack-Cali Realty Corporation began marketing a nine-
building, 2.2-million-square-foot office portfolio in Bergen County. Mack-
Cali found buyers for six of those properties during the third quarter of
2017. A joint venture of Onyx Equities and Garrison Investment Group
purchased four buildings in Paramus and Rochelle Park totaling 848,255
square feet. Mack-Cali also sold 50 Tice Boulevard in Woodcliff Lake to
Capstone Realty Group for $27.9 million, while 140 East Ridgewood
Avenue in Paramus was purchased by the tenant, Valley Health System.
One of the Paramus buildings acquired by Onyx and Garrison was 461

MIXED-USE COMING TO
PARSIPPANY
The Parsippany/Route 10 submarket saw availability decline over the
quarter by 210 basis points to 32.0%, although it continues to have the
second-highest availability in the market. Parsippany has suffered in
recent years, as traditional suburban locations have grown less attractive
than urban centers and suburbs that offer city-like amenities. However,
new retail, hotel and residential developments stand to create a more
dynamic environment in the Parsippany area.
Stanbery Development has a proposal to replace the former Dialogic and
Intel buildings on Route 10 with first-floor retail and commercial space
and up to 450 apartments. Mack-Cali plans to build a 175-room hotel a
quarter of a mile away from its Campus Drive assets. There is also a
proposal to raze office buildings in the neighborhood surrounding
Littleton Road and Campus Drive in Parsippany to allow for apartments.
At the corner of Route 46 and Waterview Boulevard, a 150,150-square-
foot retail project anchored by Whole Foods is under construction.
From Road, where Glenmark Pharmaceuticals leased 34,416 square feet
during the quarter. This deal, along with Sonys 49,271-square-foot
commitment at 115 West Century Road, drove 100,258 square feet of
net absorption in the Bergen Central submarket.
New Jersey Checks Boxes for Amazon HQ2
Several technology companies expanded during the third quarter with the
help of state incentives. In September, Amazon announced it was
accepting nationwide proposals for locations to house its second
location. The New York metropolitan area would fulfill the commerce
giants need for a populous region with a deep labor pool and extensive
transportation infrastructure. However, accommodating its 8.0 million-
square-foot projected footprint in New York City could be challenging and
costly. In addition to quick access to Manhattan, Newark and Jersey City
have a combined 6.8 million square feet of available existing office
inventory as well as shovel-ready development sites. Amazon also has
7.9 million square feet of distribution space in New Jersey, and its
Audible division already has offices in Newark and Jersey City.
Regardless of whether or not the Garden State is successful in attracting
Amazon, New Jerseys tech industry is poised for continued growth.

Lease/User Transactions

Tenant Building Submarket Type Square Feet

Societe Generale 480 Washington Boulevard Hudson Waterfront Lease Renewal 107,000
PNC Bank 2 Tower Center Boulevard Route 18/8A Middlesex Lease Extension 88,914
Billtrust 1009 Lenox Drive Princeton Area Direct Lease 88,759
Modern Meadow 340 Kingsland Street Route 46/Wayne Direct Lease 72,900
International Flavors & Fragrances Bell Works Monmouth East/GSP Direct Lease 60,000

Select Sales Transactions

Building Submarket Sale Price Price/SF Square Feet

211 Mount Airy Road Somerset/I-78 $98,500,000 $322 306,194

500 Plaza Drive Meadowlands $115,000,000 $249 461,525
Mack-Cali Bergen Portfolio Bergen Central Confidential Confidential 848,255

2
RESEARCH
NORTHERN NEW JERSEY
3Q17 OFFICE MARKET

Submarket Statistics

Total Under Total Qtr YTD Class A Class B Total

Inventory Construction Availability Absorption Absorption Asking Rent Asking Rent Asking Rent
(SF) (SF) Rate (SF) (SF) (Price/SF) (Price/SF) (Price/SF)

Central NJ 66,687,512 89,200 22.6% -523,164 -862,352 $29.98 $23.53 $26.39

I-287/Route 22 5,749,144 44,000 28.9% -410,482 -434,511 $28.77 $25.22 $27.01

Hunterdon/I-78 1,394,331 0 29.5% -97,718 -73,168 $20.77 $20.65 $20.68

Monmouth East/GSP 9,390,771 45,200 20.1% 7,436 -53,794 $31.86 $22.18 $26.48

Monmouth West 1,148,729 0 20.7% -27,428 -7,821 $23.16 $21.72 $21.69

Piscataway/I-287 South 9,864,925 0 23.2% 46,372 185,931 $21.56 $19.46 $20.25

Princeton Area 16,322,813 0 19.7% 114,353 213,857 $32.02 $23.42 $26.32

Route 18/8A Middlesex 2,864,079 0 26.3% -129,935 -122,923 $28.58 $28.32 $28.11

Somerset/I-78 10,378,438 0 25.3% -26,509 -448,629 $31.92 $24.91 $30.73

MetroPark/GSP 6,402,359 0 21.3% 1,616 -119,020 $34.53 $29.83 $30.76

Union Area 3,171,923 0 20.0% -869 -2,274 $30.00 $23.87 $23.60

Northern NJ 102,062,255 680,729 23.4% 271,561 -172,350 $33.27 $25.34 $29.87

Bergen Central 9,632,748 0 18.1% 100,258 -6,330 $27.92 $23.83 $26.06

Bergen East 4,600,482 0 17.9% 19,460 102,329 $29.92 $25.20 $28.82

Bergen North 5,294,851 0 28.5% -36,202 -234,841 $27.23 $24.67 $26.45

Hudson Waterfront 22,262,278 0 18.4% -165,523 -144,588 $43.35 $31.93 $42.62

Meadowlands 5,900,602 250,000 25.2% -78,583 -150,587 $26.82 $22.52 $23.94

Morris West/I-80 2,547,433 0 52.3% 3,032 420 $26.20 $16.35 $25.35

Morristown Area 10,662,161 0 25.2% -81,323 21,309 $32.99 $28.12 $30.54

Newark CBD 13,068,277 430,729 20.4% 11,538 71,454 $33.23 $31.32 $31.46

Parsippany/Route 10 14,674,648 0 32.0% 291,288 -90,048 $30.00 $23.06 $26.15

Route 46/Wayne 6,612,447 0 21.7% 114,322 132,965 $23.80 $20.74 $21.02

Essex West/I-280 4,588,305 0 24.3% 98,407 141,494 $28.33 $24.95 $26.48

Short Hills/Route 24 2,218,023 0 12.2% -5113 -15,927 $34.82 $29.04 $31.05

Northern/Central NJ 168,749,767 769,929 23.1% -251,603 -1,034,702 $32.21 $24.59 $28.59

3
RESEARCH
NORTHERN NEW JERSEY
3Q17 OFFICE MARKET

ECONOMIC CONDITIONS Employment By Industry

New Jersey, Annual Average 2016
New Jerseys economy improved modestly over the past 12 months,
although recent gains are in sectors that have limited impact on the office 0.0% Mining and Logging
market. The states unemployment rate fell 50 basis points since August 3.8%
15.1% 5.9% Construction
2016, while payrolls grew by 58,100. The leisure and hospitality sector,
Manufacturing
which represents 9.1% of the job market, contributed to much of the 4.2%
recent growth by adding 29,400 jobs. New Jerseys economy also Trade, Transportation, and
21.2%
9.1% Utilities
created 6,600 construction jobs during the trailing 12 months, as the Information
strength in the multihousing and industrial real estate markets is driving a
Financial Activities
building boom. Traditional office-using job sectorsprofessional services 1.8%
16.6% 6.1% Professional and Business
and financial activitiescontinue to post slow but positive growth. These Services
gains have not been enough to stimulate significant net new demand in 16.3% Education and Health
Services
the office market, although growth in the tech industry and relocations Leisure and Hospitality
from other markets are helping to backfill available space.
Other Services

Source: U.S. Bureau of Labor Statistics Government

Unemployment Rate Payroll Employment

Seasonally Adjusted Total Nonfarm, Not Seasonally Adjusted, 12-Month % Change

10% 4%

8% 2%

6% 0%

4% -2%

2% -4%

0% -6%
Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17

United States New Jersey United States New Jersey

Source: U.S. Bureau of Labor Statistics, NJDLWD Source: U.S. Bureau of Labor Statistics

Consumer Price Index (CPI) Employment Growth by Industry

All Items, 12-Month % Change, Not Seasonally Adjusted, 1982-84=100 New Jersey, August 2017, 12-Month % Change, Seasonally Adjusted
Total Nonfarm
4%
Mining and Logging
3% Construction
Manufacturing
2% Trade, Transportation, and Utilities
Information
1% Financial Activities
Professional and Business Services
0% Education and Health Services
Leisure and Hospitality
-1%
Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Other Services
Government
United States New York-Northern NJ-Long Island -10% -6% -2% 2% 6% 10%

Source: U.S. Bureau of Labor Statistics Source: U.S. Bureau of Labor Statistics

4
RESEARCH

Newmark Knight Frank Northern New Jersey Office Submarkets

Northern New Jersey
201 Route 17 N
10th Floor
Rutherford, NJ 07070
201.842.6700

One Tower Center Boulevard

Suite 2201
East Brunswick, NJ 08816
732.867.9001

1240 Headquarters Plaza, East

Tower 8th Floor
Morristown, NJ 07960
973.349.3030

Mark Russo
Research Manager
201.460.5114
mark.russo@ngkf.com

Newmark Knight Frank has implemented a proprietary database and our tracking methodology has been
revised. With this expansion and refinement in our data, there may be adjustments in historical statistics
including availability, asking rents, absorption and effective rents.

Newmark Knight Frank Research Reports are also available at www.ngkf.com/research

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