NJ-11 office market pauses while industrial leasing surges
A new report shows the district's office sector hit a temporary slowdown with rising vacancy, even as warehouse demand and multifamily construction remain strong.
The commercial real estate landscape across Northern and Central New Jersey delivered mixed results during the second quarter of 2026. The office market experienced a temporary pause following a year of improving occupancy rates, while the industrial sector continued to see healthy tenant demand. This divergence highlights how different property types are reacting to current economic conditions in Morris, Essex, and Passaic counties.
Office Market Slows Down
The region's office market recorded 929,245 square feet of negative net absorption during the quarter after posting four straight periods of positive absorption. Vacancy rose by 60 basis points to reach 22%, driven mostly by several large blocks of space returning to the market. Despite this increased availability, leasing activity actually reached 1.6 million square feet, which is a 33% increase from the previous quarter.
Bill Simoneau, senior research manager at Cushman & Wakefield, noted that the second quarter reflects more of a pause than a reversal in trends. Large space returns pushed vacancy higher, but leasing activity accelerated and continues to favor well-located, high-quality Class A buildings. Companies remain willing to commit to quality space when it supports their long-term workplace strategy.
Rental rates softened during the period with average asking rents falling to $32.29 per square foot across all classes. However, Class A assets continued to command a premium by averaging $36.15 per square foot. The largest office transactions included ACE American Insurance's renewal at 10 Exchange Place and Englewood Health's sublease in the area.
Industrial Sector Remains Strong
Industrial fundamentals remained comparatively strong during the quarter as occupier demand continued to support leasing across Northern and Central New Jersey. Warehouse and distribution leasing totaled 7.3 million square feet during the second quarter, bringing year-to-date activity to 16.0 million square feet. This represents a 42.6% increase over the same period last year.
Third-party logistics providers and logistics users led demand for industrial space, followed closely by retailers seeking distribution centers. Meanwhile, vacancy declined 50 basis points year-over-year to 9.3% as several big vacant blocks were leased despite a jump in sublease availability. Net absorption was positive for the second straight quarter, totaling 416,739 square feet.
New Housing Projects Advance
In Fair Lawn, PCCP announced it has provided a $66.85 million senior loan to Sterling Properties and Danbro Properties for the construction of Plaza Greene. This project is a 145-unit Class A multifamily community designed specifically for residents aged 55 and older with a ground-floor grocer. Demolition of the existing vacant retail building on the site has begun, and construction is expected to be completed in 2027.
The development will feature 127 market-rate units alongside 18 affordable units located at 22-01 Fair Lawn Ave. The project includes about 24,000 square feet of retail space anchored by a Sprouts Farmers Market and amenities such as a spa area and fitness center. Plaza Greene is one of the few new construction multifamily developments planned in Fair Lawn.
The property will provide residents with access to major routes including Interstate 80 and the Garden State Parkway, along with proximity to the Radburn NJ Transit train station. Lia Barsanti of PCCP stated that the project targets a supply-constrained market with strong demographic fundamentals for the growing senior population. Sterling Properties has developed over $2 billion in real estate across more than 10,000 residential units.
Industry Groups Rebrand
NAIOP NJ officially re-emerged on July 1 as CREDA NJ to align with a larger effort by its national parent organization. The Commercial Real Estate Development Association aims to expand membership across commercial real estate sectors while building on local advocacy and workforce development. CEO Daniel Kennedy celebrated the change at an event in Berkeley Heights, noting it reflects shifts in the sector.
The rebranding builds on the nearly 60-year-old group's history of supporting diverse members within the industry. The organization hosted its kickoff event at The Park, a campus undergoing a $500 million overhaul to become a mixed-use destination. This move signals an effort to better represent the diversity of membership and the changing nature of commercial real estate development.
For residents watching these changes, the data suggests that while office workers may face more availability in their search for space, industrial jobs are expanding rapidly. The new housing project in Fair Lawn offers a specific solution for seniors seeking transit-oriented living with modern amenities nearby. These shifts indicate a district where commercial activity is evolving rather than shrinking overall.
Questions residents are asking
Is the office market in NJ-11 currently growing or shrinking?
The office market experienced a temporary pause with negative net absorption and rising vacancy to 22% in Q2 2026. However, leasing activity actually increased by 33%, suggesting companies are still seeking high-quality Class A buildings despite the slowdown.
What new housing is being built for seniors in Passaic County?
Plaza Greene in Fair Lawn will be a 145-unit community with 127 market-rate and 18 affordable units specifically for residents aged 55+. Construction began after demolition of the existing site, with completion expected in 2027.
How is industrial demand performing compared to last year?
Industrial leasing activity increased by 42.6% year-over-year through Q2 2026, driven largely by logistics providers and retailers. Vacancy in this sector declined to 9.3%, indicating strong tenant demand for warehouse space.
Sources