Teterboro, N.J. – NAI James E. Hanson, the largest New Jersey-based full-service independent commercial real estate firm, released its 2Q 2026 Office Report, showing that a continued flight to quality is widening the gap between in-demand Class-A space and struggling Class-B and C assets across Northern and Central New Jersey.
Overall vacancy across the region improved year-over-year to 25.8%, down from 26.7%, even as leasing activity softened slightly and net absorption remained negative for the period. The improvement was driven largely by the ongoing removal of outdated office space from the market, rather than broad demand growth, with an estimated 20 million square feet of obsolete inventory demolished or redeveloped statewide for alternate uses. More than 5 million square feet has been redeveloped, or is slated for redevelopment, in Parsippany alone.
Class-A vacancy fell to 26.5% at mid-year, down from 28.0% one year ago, as tenants increasingly gravitate toward well-located, amenity-rich buildings offering features such as cafes, fitness centers and outdoor space, even as many are shrinking their overall footprints. Older Class-B and C assets, by contrast, continue to struggle to attract tenants at the same pace.
Average asking rents rose to $32.36 per square foot, up 2.3% from the same period last year, reflecting the shift toward higher-quality space entering the market. Class-A rents reached $34.27 per square foot, while Class-B rents trailed at just over $26.00 per square foot. Leasing activity totaled 2,250,146 square feet year-to-date, a slight decline from the same point in 2025, with the largest transactions this year split between renewals and new leases.
“The story of the Northern and Central New Jersey office market right now is one of bifurcation,” said James Delmonte, Vice President and Director of Research at NAI James E. Hanson. “Tenants are consolidating their footprints, but they’re increasingly gravitating towards high-quality buildings with a full suite of amenities. That flight to quality, combined with the ongoing removal of obsolete space from the market, is what’s driving vacancy lower, even as overall tenant demand remains uneven.”
Submarket performance varied widely across the region:
- The Hudson Waterfront commanded the highest rents in the market, with overall asking rents averaging $42.31 per square foot, despite overall submarket vacancy of 29.0%.
- Union posted the lowest vacancy rate in the market at 13.9%, among the tightest submarkets in Northern New Jersey.
- The Woodbridge/Metro Park submarket posted some of the region’s highest asking rents, with overall rates reaching $36.84 per square foot.
- Parsippany/I-287/Rt. 10 posted elevated vacancy of 29.9%, reflecting the submarket’s ongoing redevelopment activity as owners reposition older office stock.
- Hunterdon recorded the highest vacancy rate in the market at 47.8%, underscoring the continued softness among older, lower-quality assets outside the region’s core submarkets.
NAI James E. Hanson was involved in one the most notable office leases in New Jersey so far this year: the 72,326-square-foot lease for Jersey Mike’s Franchise System at One CommVault Way in Fort Monmouth.
The investment market has continued to show strength through the first half of the year. Keystone Property Group’s $56.5 million acquisition of a four-property portfolio at 30 Knightsbridge Road in Piscataway, and Real Capital Solutions and Lamar Companies’ $52 million acquisition of 30 Montgomery Street in Jersey City, are among the largest deals year-to-date.
To download the full 2Q 2026 Office Report, visit: https://naihanson.com/market-reports/
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