NJ Industrial Leasing Slows, Office Market Shows Signs of Stabilization

On Apr 4, 2025

Cushman & Wakefield has released its Q1 2025 reports for the Northern & Central New Jersey office and industrial sectors, highlighting signs of stabilization in office market fundamentals and shifting dynamics in the industrial sector.

Despite continued occupancy losses, the rate of decline in New Jersey’s office market slowed in Q1 2025. Net absorption totaled -541,416 square feet (sf), yet the quarterly average for the past year was -177,665 sf, an improvement compared to the -1.1 million square feet (msf) average of the previous four quarters.

Additionally, an increase in office building demolitions and repurposing contributed to a turning point in the vacancy rate. Holding steady at 22.4%, vacancy even showed a slight 10-basis-point improvement year-over-year.

New leasing activity remained resilient at 1.8 msf, matching the two-year quarterly average. This was notable given that only one new lease exceeded 100,000 sf. Instead, mid-size relocations, such as Aegis in Jersey City, Acrisure in Parsippany and Reworld in Florham Park, drove leasing volume this quarter.

“Tenants continue to prioritize high-quality office space that meets modern workplace demands,” said Felix Soto, Senior Research Analyst. “The stabilization in vacancy rates and steady leasing activity indicate that well-capitalized properties with strong ownership remain competitive in the current market.”

The Northern & Central New Jersey industrial market experienced a slower start to 2025, with warehouse leasing activity totaling 5.5 msf, down from 8.1 msf in Q4 2024 and 6.2 msf a year ago. The Port Region and Port South submarkets led activity, accounting for 41.4% of total leasing volume. Notably, Asian-supplied third-party logistics (3PL) firms continued to expand, representing 22.2% of all leases and 35.7% of new Class A demand (2.8 msf).

While overall net absorption remained negative for the eighth consecutive quarter at -1.6 msf, Class A properties bucked the trend, posting positive absorption despite the rise in sublease supply. Vacancy climbed 280 basis points year-over-year to 9.4%, as 16.3 msf of new vacancies entered the market. Additionally, sublease space increased sharply by 27.4% from last quarter, reaching 8.4 msf.

New construction slowed significantly, with completions at their lowest level since 2010 at just 517,288 sf. However, pre-leasing activity showed improvement, reaching 63.6% as developers increasingly focused on build-to-suit projects rather than speculative development.

“The industrial market is experiencing a recalibration following years of record growth,” added Soto. “Despite softer leasing activity, demand for high-quality space remains strong, particularly in Class A properties. The slowdown in speculative construction should help balance supply and support potential occupancy gains later in 2025.”

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