Jones Lang LaSalle
Vacancy rate stuck at 20% for four years
BY TIM O'REILEY DAILY RECORD
PARSIPPANY -- Medical-advertising agency CommonHealth provides a glimpse into why Morris County's office vacancy rate has been stuck at about 20 percent for four years in a row.
In October, CommonHealth announced that it had signed a lease for 166,000 square feet in Morris Corporate Center III, among the biggest commercial real-estate deals of the year.
But instead of adding hundreds of new people to the county work force, the agency will leave behind empty buildings elsewhere in Parsippany as it puts several of its divisions under one roof.
Although the amount of vacant space in the county will drop because CommonHealth's new location also will house some employees now working in Wayne, the flow of workers has moved out of Morris with other companies.
For example, Dendrite International moved a few miles south on Route 202 from Harding, in Morris County, to Bedminster, in Somerset County.
A year-end report by the brokerage GVA Williams characterized the state of the commercial real-estate market as a "statistical standstill"that slowed in the second half of 2005.
A notable hurdle is that "the market lacks the abundance of small to mid-size companies migrating from one building to another as they continue to grow."
"In 2005, particularly in the latter half, the market experienced more in-places renewals and fewer tenants expanded."
For example, Novartis, a Swiss drugmaker with its North American headquarters in East Hanover, is pushing ahead with a major expansion and renovation of its campus there, more to make room for operations now in leased space rather than to hire new people.
Vacancy rate rising
Cushman & Wakefield calculated the county's year-end vacancy rate at 23.4 percent, 1.2 points higher than a year ago, as the amount of vacant space increased by 704,000 square feet.
By contrast, the average for 11 counties in northern and central New Jersey stayed the same at 19 percent.
In contrast to previous years, when industry experts forecast that the numbers would start improving, expectations are much more modest.
"I'm not concerned nor overly optimistic," said Jeffrey Heller, an executive vice president at the Florham Park office of Trammell Crow Co.
"I would say the (leasing) tide is creeping in a little bit, but I don't see any dramatic change. The vacancy rate might drop by a point or two at the most."
Companies take their time deciding what to do when their leases come to their end, "and often wind up renewing or maybe downsizing" their space to fit tighter budgets, GVA Williams senior vice president John K. Cunningham said.
Perhaps the brightest spot in the past year was Verizon Communications' purchase of the former AT&T headquarters in the Basking Ridge of Bernards, which had sat empty since the end of 2001.
Verizon is gutting and renovating the entire 1.3 million-square-foot complex for its new operations center, which is expected to hold 3,000 people by mid-year.
In addition, Verizon has mapped out plans to build a pair of 175,000-square-foot buildings on the property, big enough for several hundred more employees.
Besides transferring in people from other parts of the company's territory, industry experts hope that Verizon's moves will spark activity in the depressed corridors along both sides of Route 287 from suppliers and subcontractors wanting to be close to the giant telecom.
BASF site still empty
Rather than focus on the overall vacancy rate, industry executives highlight several subcurrents:
• The former North American headquarters of BASF in Mount Olive sits empty, with no buyers even rumored.
The size of the complex, at 970,000 square feet, not only limits the number of companies that could use it but also adds about 4 percent to the county's vacancy rate.
Excluding that project, the vacancy rate would drop into the mid-teens, depending on the survey.
That's the rate at which tenants and landlords have about the same negotiating power, most experts say.
• Activity in different areas in the county has been uneven.
Almost all of the major office buildings in Florham Park have filled up, but empty floors are available in places, such as Parsippany and south of Morristown.
In Parsippany, for example, the 120,000-square-foot building at 11 Waterview has never had a tenant since it was completed four years ago.
Cunningham attributed that to an owner that will accept only a set price rather than negotiate.
Cutting deals on rent or improvements has become common in recent years in the face of a persistently high vacancy rate.
• Steel is coming out of the ground at 100 Kimball Ave. in Parsippany, a 175,000-square-foot office building that was the first to be launched in Morris County in four years without tenants signed ahead of time.
Florham Park-based developer Gale Co. believes that a shortage of new, top-of-the-line space in blocks of at least 100,000 square feet warranted the gamble of going ahead on a speculative basis.
Some in the industry, such as Heller, believe that Gale probably had strong indications of interest before starting construction, even if it has no leases in hand.
Among industrial properties, the vacancy rate edged down to 7 percent from 8.6 percent at the end of 2004, according to Cushman & Wakefield.
But while Morris County is the largest office market in New Jersey, it is the smallest among five northern counties in industrial space.
Morris' industrial capacity is less than one-fourth the size of Middlesex's, with its huge concentration of warehouses along the New Jersey Turnpike.
Tim O'Reiley can be reached at (973) 428-6651 or toreiley@gannett.com.
Vacancy rate stuck at 20% for four years
BY TIM O'REILEY DAILY RECORD
PARSIPPANY -- Medical-advertising agency CommonHealth provides a glimpse into why Morris County's office vacancy rate has been stuck at about 20 percent for four years in a row.
In October, CommonHealth announced that it had signed a lease for 166,000 square feet in Morris Corporate Center III, among the biggest commercial real-estate deals of the year.
But instead of adding hundreds of new people to the county work force, the agency will leave behind empty buildings elsewhere in Parsippany as it puts several of its divisions under one roof.
Although the amount of vacant space in the county will drop because CommonHealth's new location also will house some employees now working in Wayne, the flow of workers has moved out of Morris with other companies.
For example, Dendrite International moved a few miles south on Route 202 from Harding, in Morris County, to Bedminster, in Somerset County.
A year-end report by the brokerage GVA Williams characterized the state of the commercial real-estate market as a "statistical standstill"that slowed in the second half of 2005.
A notable hurdle is that "the market lacks the abundance of small to mid-size companies migrating from one building to another as they continue to grow."
"In 2005, particularly in the latter half, the market experienced more in-places renewals and fewer tenants expanded."
For example, Novartis, a Swiss drugmaker with its North American headquarters in East Hanover, is pushing ahead with a major expansion and renovation of its campus there, more to make room for operations now in leased space rather than to hire new people.
Vacancy rate rising
Cushman & Wakefield calculated the county's year-end vacancy rate at 23.4 percent, 1.2 points higher than a year ago, as the amount of vacant space increased by 704,000 square feet.
By contrast, the average for 11 counties in northern and central New Jersey stayed the same at 19 percent.
In contrast to previous years, when industry experts forecast that the numbers would start improving, expectations are much more modest.
"I'm not concerned nor overly optimistic," said Jeffrey Heller, an executive vice president at the Florham Park office of Trammell Crow Co.
"I would say the (leasing) tide is creeping in a little bit, but I don't see any dramatic change. The vacancy rate might drop by a point or two at the most."
Companies take their time deciding what to do when their leases come to their end, "and often wind up renewing or maybe downsizing" their space to fit tighter budgets, GVA Williams senior vice president John K. Cunningham said.
Perhaps the brightest spot in the past year was Verizon Communications' purchase of the former AT&T headquarters in the Basking Ridge of Bernards, which had sat empty since the end of 2001.
Verizon is gutting and renovating the entire 1.3 million-square-foot complex for its new operations center, which is expected to hold 3,000 people by mid-year.
In addition, Verizon has mapped out plans to build a pair of 175,000-square-foot buildings on the property, big enough for several hundred more employees.
Besides transferring in people from other parts of the company's territory, industry experts hope that Verizon's moves will spark activity in the depressed corridors along both sides of Route 287 from suppliers and subcontractors wanting to be close to the giant telecom.
BASF site still empty
Rather than focus on the overall vacancy rate, industry executives highlight several subcurrents:
• The former North American headquarters of BASF in Mount Olive sits empty, with no buyers even rumored.
The size of the complex, at 970,000 square feet, not only limits the number of companies that could use it but also adds about 4 percent to the county's vacancy rate.
Excluding that project, the vacancy rate would drop into the mid-teens, depending on the survey.
That's the rate at which tenants and landlords have about the same negotiating power, most experts say.
• Activity in different areas in the county has been uneven.
Almost all of the major office buildings in Florham Park have filled up, but empty floors are available in places, such as Parsippany and south of Morristown.
In Parsippany, for example, the 120,000-square-foot building at 11 Waterview has never had a tenant since it was completed four years ago.
Cunningham attributed that to an owner that will accept only a set price rather than negotiate.
Cutting deals on rent or improvements has become common in recent years in the face of a persistently high vacancy rate.
• Steel is coming out of the ground at 100 Kimball Ave. in Parsippany, a 175,000-square-foot office building that was the first to be launched in Morris County in four years without tenants signed ahead of time.
Florham Park-based developer Gale Co. believes that a shortage of new, top-of-the-line space in blocks of at least 100,000 square feet warranted the gamble of going ahead on a speculative basis.
Some in the industry, such as Heller, believe that Gale probably had strong indications of interest before starting construction, even if it has no leases in hand.
Among industrial properties, the vacancy rate edged down to 7 percent from 8.6 percent at the end of 2004, according to Cushman & Wakefield.
But while Morris County is the largest office market in New Jersey, it is the smallest among five northern counties in industrial space.
Morris' industrial capacity is less than one-fourth the size of Middlesex's, with its huge concentration of warehouses along the New Jersey Turnpike.
Tim O'Reiley can be reached at (973) 428-6651 or toreiley@gannett.com.
posted by Jones Lang LaSalle NJ News Blog at 11:54 AM
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