Colliers reports 1.2 MSF of positive absorption, sharp drop in availability rate

Market Summary

Resilient leasing demand and a slowdown in new supply additions produced a strong second quarter of 2025 in the New Jersey office market. Despite fewer large transactions, leasing activity was steady at 2.1 million s/f, a 6.3% improvement from one year ago, as tenants across size segments continued to pursue modern, well-located, amenitized spaces. Meanwhile, just two spaces 50,000 s/f and greater became available, compared to seven during the previous quarter. As a result, the availability rate declined from 25.3% to 24.8%, the sharpest quarter-over-quarter decrease in nearly seven years.

The market recorded 1.2 million s/f of positive net absorption during the second quarter. Absorption was positive in 14 out of the 21 submarkets, including Princeton and Morristown, which combined for more than half a million s/f of occupancy gains. The single largest new occupancy was the delivery of Sanofi’s new 260,000 s/f headquarters in downtown Morristown.

Asking rents continued to edge upwards and now average $31.26/SF. The average class A asking rent is $33.91/SF and has grown by 2.4% over the past year. Landlords that have made significant capital investments in their buildings are generating the most leasing and seeing the highest levels of rent growth.

Availability Rate Sees Sharpest Decline in Seven Years

Tenant activity at trophy-quality buildings, particularly among life sciences and healthcare companies, contributed to declining availability during the second quarter. Consumer healthcare company Haleon leased 78,635 s/f at Connell Corporate Center, relocating its U.S. headquarters from Warren. In Princeton, Sun Pharmaceuticals purchased a nearly 100,000 s/f building at 750 College Rd. East for occupancy following the approval of a $5.2 million tax incentive under the state’s Emerge program. Acadia Pharmaceuticals leased 52,771 s/f at 210 Carnegie Center in Princeton, doubling its previous footprint. In addition to these new transactions, notable renewals included Sills, Cummis & Gross recommitting to 71,157 s/f in Newark and MIAX renewing for 94,445 s/f at in Princeton.

Sublease availability declined to 6.3 million s/f, marking its lowest level since the fourth quarter of 2020. This reduction was driven in part by Walmart’s sublease of 86,443 s/f at 221 River St. in Hoboken and Michael Baker International’s 39,653 s/f sublease in Princeton. Additionally, expiring subleases converting to direct space have contributed to the trend. The sublease market will likely tighten further, especially for high-quality, plug-and-play options.

While redevelopment of obsolete office inventory across New Jersey continues, progress remains slow due to high construction costs and lengthy entitlement processes. Despite these challenges, some projects are advancing, helping to chip away at the market’s oversupply. During the quarter, the former Avis Budget headquarters in Parsippany was demolished to make way for a new Life Time Fitness facility and 238 apartments. A nearby building at 7 Campus Drive was acquired for redevelopment to industrial use. A growing number of properties are being returned to lenders, potentially accelerating the redevelopment trend.

Improving market fundamentals suggest that a gradual recovery is underway. While hybrid work remains the dominant strategy, a growing number of occupiers are formalizing return-to-office policies. At the same time, continued reductions in sublease availability and the removal of obsolete properties for redevelopment are expected to support a more balanced market during the second half of 2025.