Southern New Jersey Epitomizes Consistency of the Suburban Office Market

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NAI Mertz brokered the sale of Eastgate Business Center, a 116,000-square-foot, eight-building office park in Mount Laurel, New Jersey, to Strategic Funding Alternatives LLC in late 2019.

As an adjunct of the greater Philadelphia market, but with a population that supports its own industry, Southern New Jersey is the archetype of the suburban office market.

While throughout the country there has been a trend of firms migrating back to urban centers, Southern New Jersey has held its own against its metropolitan neighbor. In some instances, this area has outperformed average suburban office market metrics.


Rebecca Ting, NAI Mertz

For example, the national vacancy rate for suburban office markets stood at 22.1 percent at the end of 2019. Midway through the first quarter of 2020, the vacancy rate in Southern New Jersey’s core of Burlington, Camden and Gloucester Counties stands at 8.7 percent. That rate represents a slight increase from year-end 2019, but is consistent with the 8.5 percent median rate for the market over the past four years.

Market rents have been on a steady ascent since mid-2016 and now stand at $21.30 per square foot. The two primary submarkets of Southern New Jersey — Cherry Hill and Marlton–Moorestown–Mount Laurel (3M) — are both performing well and are approaching an equilibrium on the metrics of
vacancy rate and market rent.


Julie Kronfield,
NAI Mertz

Office space in the 3M submarket, with its prime location near Exit 4 of the New Jersey Turnpike, now commands a market rent of $22.73 per square foot but its vacancy rate has been on the rise over the past few years and is now at 11.1 percent. Cherry Hill, on the other hand, while still hovering above the market vacancy rate at 12.1 percent, has been steadily trending downward since a peak of 19.2 percent in mid-2013. This area’s market rent is now roughly in-line with the overall market at $21.28 per square foot.

Leasing, Sales Activity

Firms that are relocating or expanding within the market have driven leasing activity in Southern New Jersey. While there certainly is a healthy amount of intra-market moves by existing firms, we’re also seeing relocations and expansions from firms based outside the region, as well as numerous new businesses looking for space.

In terms of sales activity, over the past two years, office and flex parks have attracted the most interest from investors. Fifteen of the top 20 transactions by sales volume during that time were portfolio sales.

The majority of sales activity remains concentrated in the Cherry Hill and 3M submarkets. Among the parks changing hands were Colwick Business Center and Commerce Center in Cherry Hill and Fellowship Office Complex in Mount Laurel. The average sales price per square foot has appreciated over the last two years to $123 per square foot, up from $100 per square foot over the prior five-year period.

Strategic Funding Alternatives LLC (SFA) has been the top buyer over the last two years, purchasing both Class A assets like Woodland Falls Corporate Center, a three-building office complex in Cherry Hill, as well as value-add opportunities like Eastgate Business Center, an eight-building office/flex park in Mount Laurel. The latter transaction was completed by NAI Mertz. Since its founding in 2016, SFA has become one of the fastest-growing ownership groups in the South New Jersey market with 23 properties and more than 1 million square feet in its

Ancillary Benefits

In 2013, the Economic Development Authority of New Jersey introduced the Grow New Jersey Assistance Program, a transferable tax credit that incentivized corporations to create and retain jobs in New Jersey. Now that the program has expired, we have a clearer picture of the impact the incentives had on office tenancy in the Southern New Jersey market. While the concern that firms in the Cherry Hill and 3M submarkets would relocate to Camden where the tax benefits were greatest and leave large vacancies in their wake did occur to some extent, the spaces they vacated have largely been backfilled and have had little effect on the overall vacancy rate.

Among the availabilities created due to Camden transplants, 1 Holtec Drive,  the former headquarters of Holtec International, has been converted to multi-tenancy and is now 50 percent leased. A former American Water building in Mount Laurel was fully leased to a healthcare firm, and NFI’s former headquarters in Cherry Hill was leased to a behavioral health group in a transaction completed by NAI Mertz.

Due to its location on Route 70 in Cherry Hill, the owners of Subaru North America’s former headquarters felt that the best use for the property going forward involved a conversion to either a retail, medical or multifamily use. The owned opted to demise the facility to help entice a developer.

New development in the region had largely been centered on the NJEDA incentivized relocations to Camden and several medical facilities in the Tri-County area. Beyond that, the construction pipeline shows minimal development on the

The healthcare sector continues to be a top consumer of space in Southern New Jersey. But consolidation continues among the major health systems in the area, most recently with Virtua acquiring Lourdes Health System. We’re waiting to see how that impacts the provider’s overall footprint, but early indications are that there won’t be significant space returned to market.

Based on the strong recent sales activity and continued healthy leasing demand, we expect that the performance of the office market in Southern New Jersey will be reliably steady and continue to function as the standard for suburban office markets nationwide.

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