Office buildings in New Jersey’s transit hub markets suffered a rise in vacancy at the end of last year but fared better than those in places without easy access to mass transportation, according to an annual report from real estate services firm JLL.
The vacancy rate for the state’s transit hub market, defined as properties close to a downtown center and near mass transit commuting options, climbed to 19.2% at the end of last year from 16.9% at the end of 2015.
The transit hub market’s rate held up better than the 26.4% rate for the state’s suburban office market located outside these clusters, the report noted. Rental rates for transit hub properties also fetched an average price of $32.46 a square foot, compared with $26.02 a square foot for buildings situated in traditional suburban settings.
The increase in vacancy near transit hubs was fueled largely by vacancies and space soon to be on the market in Jersey City, where consolidations of Deutsche Bank AG and a pharmaceutical company acquisition have added more than 400,000 square feet to the market, the report said.
The analysis described the overall increase as temporary. Companies are expected to continue to look for office space near “walkable, amenity-rich areas and with access to mass-transit options,” the report said.
Over the last several years, New Jersey’s wider office market has been weighed down by vacancies at older, suburban office campuses.
Within the state’s transit hub market, the suburban and urban hubs went in different directions. The vacancy rate for smaller suburban hubs such as Metropark, Morristown, Princeton and Summit declined to 16.8% in 2016 from 17.5% in 2015. The urban hubs, which have a much larger supply base and include Hoboken, Jersey City, New Brunswick, Newark and Trenton, experienced an increase, with the vacancy rate rising to 20% from 16.7%.
Developers are looking to assemble sites to build bigger office facilities in suburban transit hubs such as Morristown and Summit, where the office space is limited and geared toward smaller tenants, said Dan Loughlin, international director and broker lead of JLL’s New Jersey office.
“Everybody’s trying to go back into these markets to try to capture the mass transit, amenities and urban settings, and this product doesn’t exist in abundance,” Mr. Loughlin said.
Write to Keiko Morris at Keiko.Morris@wsj.com