By David Simon, COO of NAI DiLeo-Bram & Co.
OFFICE
There appears to be a contrast in various office policies that companies have implemented due to the pandemic. Some companies are currently operating fully remotely; some are requiring all of their employees to be in the office full time while others are adopting a hybrid structure. This shift has impacted the overall absorption of office space and has been a factor in the way companies have opted to utilize existing space and determine future office space needs.
Demand for office space in the first quarter of this year showed improvement over the same time last year. There is a desire by many to spend some time with colleagues and clients, in person. The challenge is determining the proper balance that works best for everyone and enables companies to generate desired results for clients while providing the right environment for employees. Companies are placing an emphasis on employee wellness and are focused on building systems and practices such as indoor air quality and more stringent daily cleaning procedures. As a result, this has benefited owners of class A properties and others who have upgraded their properties to comply with these types of tenant requests and concerns.
The abundance of available class A sublease space in the market presents some excellent options for tenants with office requirements. However, sublease space is not always the right solution for a variety of reasons. In this environment where recruiting and retaining top talent is competitive and critical, companies want their office space to properly reflect their own unique brand and culture. Some sublease spaces, which may be financially appealing, might not be able to effectively convey some of the intangible qualities that a company wants to project.
Without any unforeseen events, overall office occupancy rates are anticipated to increase throughout 2022.
INDUSTRIAL
The industrial market soared during the past two years as e-commerce rapidly expanded.
Despite many consumers across the U.S. returning to in-person shopping, e-commerce continues to grow because of the convenience it offers. As a result, demand for industrial space in New Jersey is outpacing the limited supply currently available. The consistent need for industrial properties in this market has led to record low vacancy rates and record high rental rates.
With multiple companies vying for the same properties, Landlords are in an enviable position and are experiencing unique leverage. It is expected that rates will continue to increase throughout the year. The unwavering demand has supported new construction in this market and pricing for new buildings has reached an all-time high. In fact, many of the new buildings have been pre-leased while still in the construction phase. The demand for space in this area has dramatically increased competition on both the user/occupier side as well as the owner/investor side of the business. Given current market trends, the remainder of 2022 looks to be another solid year for the New Jersey industrial sector.
David Simon is COO at NAI DiLeo-Bram & Co.