New Jersey Office Vacancy Drops to 24.5% as Class A Leads Rebound

A sixth straight quarter of gains

JLL's numbers say New Jersey's office market is doing better than it has in almost four years. The overall vacancy rate for Northern and Central New Jersey fell 50 basis points from the previous quarter to 24.5% in the third quarter of 2026. That is the lowest reading since late 2022.11 The market absorbed more than 927,600 square feet during the quarter, its sixth consecutive quarter of positive net absorption, which brings the year-to-date total to about 2.2 million square feet.1113

The pace is picking up. At mid-year JLL had vacancy at 25% after 704,150 square feet of second-quarter absorption. The third quarter beat that by a wide margin.12 It also marks a full turn from early 2025, when JLL reported vacancy of 27% after more than 929,000 square feet of negative absorption, driven partly by Samsung putting its Ridgefield Park headquarters on the market and Bank of America leaving a Jersey City building.16

The headline number hides how uneven the recovery is, though, and other brokerages measure the same market very differently. The improvement in occupancy also sits next to worsening stress in commercial real estate debt and a separate fight over data centers that is changing how the state's legacy corporate campuses get reused.

Class A and the Hudson Waterfront

Most of the demand went to the top of the market. Class A buildings took almost 80% of third-quarter absorption. Class A vacancy, which peaked near 31% in early 2025, has dropped to 27.9%.11 The Hudson Waterfront led the state with more than 699,000 square feet of Class A absorption, and its Class A vacancy fell four percentage points in one quarter to 30.2%.11 Fidelity Investments signed the quarter's biggest deal, adding 139,080 square feet at 499 Washington Blvd in Jersey City.1122 The waterfront also has the highest average direct asking rent in the state, at $44.85 per square foot.11

JLL's mid-year report showed how strong this preference is. So-called Premier Class A buildings, meaning those built or heavily renovated within the past decade, had direct vacancy of 13.5%. The rest of the Class A market stood at 27.1%.12

The weak spots are real. Parsippany and Bergen East both lost occupancy in the third quarter, and several suburban submarkets still have Class A vacancy well above the state average.11 JLL's Tim Greiner expects momentum to continue through year-end but said the recovery will stay uneven, and that older buildings without upgrades face a harder road.1311

Demand is also changing shape. Active tenant requirements have grown to nearly 5.8 million square feet, up from under 4 million in 2021 and 2022, and about a third of them span more than one submarket.11 Greiner says tenants have become more flexible about location and will look across markets to find the building with the right amenities and infrastructure.13 For landlords, this means competition is no longer local. A dated Morris County office park now competes against a renovated Jersey City tower for the same tenant.

Different brokerages, different markets

The brokerages don't agree on what is happening. JLL reports falling vacancy and positive absorption. Cushman & Wakefield's third-quarter data showed net absorption turning negative as tenants gave back 798,745 square feet, and its overall vacancy rate rose 40 basis points to 21.7%.25 Cushman did find that new leasing commitments jumped to 1.9 million square feet, up 21% from the prior quarter.25 NAI James E. Hanson puts vacancy at 25.2%. It reports that year-to-date Class A net absorption has turned positive for the first time since 2019.24 Newmark's second-quarter report had total vacancy at 18.6% on an inventory of about 165 million square feet.28

The gaps come from differences in which buildings each firm counts, how it treats sublease space, and where it draws submarket lines. In this cycle, what matters most is the direction of the trend, and the firms agree on that more than on the levels. Every report describes a market where demand is concentrating in high-quality space. Cushman's leasing surge and JLL's absorption streak both say tenants are signing again. The divergence on absorption is a reminder that move-outs from older buildings can still cancel out move-ins at newer ones in any given quarter.

Cushman has also argued that the headline vacancy rate exaggerates how weak the market is. A late-2025 analysis found that 2% of buildings held 33% of the vacant space in Northern and Central New Jersey. Excluding those outliers, the reported 22.1% vacancy dropped to a median-based 14.8%.14 A later Cushman paper said vacancy falls from 22.0% to 6.8% once long-marketed listings are removed.15 These numbers come from a brokerage with an interest in promoting the market. Still, the basic point holds up: a group of empty former corporate campuses accounts for a large share of the statewide figure.

The shrinking inventory

The recovery depends partly on the market getting smaller. There is no office space under development in the state, according to JLL's third-quarter data, so existing buildings face no new competition.11 Newmark counted about 646,250 square feet under construction at mid-year, with the Helix H-1 project in New Brunswick as the main one.28 By either count, the pipeline is close to empty.

The stock is also being removed. More than 443,000 square feet at 480 Washington Boulevard in Jersey City came off the availability list in the third quarter because the tower's upper floors are planned for residential conversion.2211 JLL said in early 2025 that more than 8.5 million square feet of office space had been taken out of the market over five years.16 A broader statewide count found 141 office conversion projects, completed, under way, or proposed, covering about 22.1 million square feet, or roughly 9.6% of inventory. Morris, Bergen, and Essex counties account for about two-thirds of them.9

That matters for reading the 24.5% figure. Some of the vacancy decline comes from tenants leasing space, and some comes from removing empty space from the inventory. Both are healthy, but they reflect different things. A market that improves by demolishing its worst buildings is not necessarily seeing strong demand.

The debt side is getting worse

On the lending side, conditions are deteriorating even as leasing improves. Trepp's office CMBS delinquency rate rose 16 basis points to 12.16% in September, and the overall CMBS rate reached 8.02%, the highest since November 2020.31 One analysis noted that office is now 1.5 percentage points above its worst levels from the financial crisis.33 CRED iQ, which counts performing matured loans, put office delinquency at 13.2% in August and found that 71% of distressed office balances were tied to failed or upcoming refinancings, not missed payments.40

New Jersey has its share of these cases. A CMBS trust has asked a federal court to foreclose on the Lenox Drive office park in Mercer County and appoint a receiver. It says a $130 million loan that matured on January 1, 2026 was never repaid, and that the balance owed had grown to about $141.8 million by July.41 In northern New Jersey, two office buildings backing a $50.89 million CMBS loan, delinquent since March, were reappraised at just $19.7 million, and the deal was downgraded.42

This is the trap for older suburban buildings. Leasing demand favors new and renovated space, while lenders are refusing to extend loans on the rest. Commercial Observer has reported that "extend and pretend" is ending for securitized office debt, with more than half of maturing loans expected to have trouble paying off.4647 Foreclosures and deep markdowns push weak buildings toward conversion or demolition, which then lowers vacancy for the buildings that remain.

REITs left, private capital is buying

The ownership side shows the same split. Veris Residential, formerly the office REIT Mack-Cali, sold its Harborside towers in Jersey City as it became a pure multifamily company.5453 An Affinius-led consortium later agreed to take Veris private in a $3.4 billion deal. Private buyers are moving into the space the REIT left behind. Real Capital Solutions and Lamar Cos. bought 30 Montgomery, a 368,049-square-foot Exchange Place tower that is 61% leased. The building last sold for $101 million in 2016.52 An executive at Real Capital Solutions said assets like this are being repriced because of capital markets, not fundamentals.52 That bet makes sense if waterfront Class A vacancy keeps falling the way JLL's numbers show.

Data centers compete for old campuses

Data centers are now one of the options for empty corporate campuses. CoreWeave is converting a former lab building at the former Merck headquarters campus in Kenilworth into an AI data center. DCD put the planned investment at $1.2 billion for a 280,000-square-foot building.7 NJ.com described a $1.8 billion facility of nearly 400,000 square feet, expected to be fully operational by early 2027.5 The reports differ on cost and size. Either way, it shows how fast a former pharmaceutical campus can become power-heavy infrastructure. In Vineland, DataOne's campus of about 2.6 million square feet is under construction for Nebius and has drawn two city stop-work orders.10

The political backlash is growing. At least two dozen municipalities have used home-rule powers to block data centers.4 Governor Mikie Sherrill signed a Data Center Fair Share law in July that puts large facilities in their own ratepayer class, but she has not pursued a statewide construction moratorium.38 For owners of stranded office buildings, that limits the data center option. It works on sites with heavy power infrastructure, like Kenilworth's dual feeds and on-site cogeneration plant7, and only in towns that haven't closed the door.

Outlook

The best reading of the third quarter is that New Jersey's office market is improving at the top while weaker buildings leave the inventory. Demand is real and growing, new supply is close to zero, and conversions are steadily removing obsolete space. The improvement is concentrated in premium buildings, though, and the financing for everything else is still failing. The question for 2027 is whether the 5.8 million square feet of tenant requirements turn into absorption fast enough to outpace the maturity defaults hitting suburban office debt. Until that happens, a 24.5% vacancy rate mostly shows a market splitting between the buildings tenants want and the buildings lenders are giving up on.