Manulife US REIT - Annual Report 2021

MANULIFE US REIT 56 • Northern New Jersey’s recovery has been slower than the national average due to the Tri-State Area’s higher exposure to pandemic-induced migration and remote work-friendly industries, combined with higher costs of living and doing business. • Hudson Waterfront and Meadowlands leasing activity has been minimal in recent months, although the former has outperformed New Jersey overall. • Muted market conditions maintain a tenant-favourable environment, although there is significantly less volatility than in urban gateway cores. • Intense redevelopment in Jersey City will provide needed housing for employees and help to boost the proximate employee base for local employers. Office Market Trends Northern New Jersey’s office market remained largely in statis during 2021, with only incremental movement in terms of occupancy, vacancy and asking rents. While the HudsonWaterfront sawa third consecutive year of negative net absorption, growth in vacancy slowed considerably to 23.4% after reaching a record high in 2020. On the other hand, occupancy grew for a second straight year in the Meadowlands, helping to bring vacancy down closer to the 20% mark. Transaction volumes wereminimal throughout the Hudson Waterfront and Meadowlands submarkets in the second half of the year. Only one lease was signed larger than 50,000 sq ft – Roar Digital at 200 Hudson Street – with three others larger than 10,000 sq ft, all also nearby in Jersey City. The Meadowlands saw no sizeable transactions during this time. Overall market statistics Forecast YTD net absorption (s.f.) -1,981,604 Under construction (s.f.) 233,630 Total vacancy (%) 26.8% Sublease vacancy (s.f.) 7,815,338 Asking rent ($ p.s.f.) US$29.76 Concessions Rising Hudson Waterfront vacancy growth has slowed since 2010 1.0 25% 20% 15% 10% 5% 0% 0.5 0.5 1.0 0.0 -1.5 2008 2009 2012 2013 2016 2017 2010 2011 2014 2015 2018 2019 2020 2021 Net absorption (m.s.f.) Total vacancy (%) Meadowlands vacancy down for a second year 0.4 50% 40% 30% 20% 10% 0% 0.2 0.0 -0.2 --0.4 2008 2009 2012 2013 2016 2017 2010 2011 2014 2015 2018 2019 2020 2021 Net absorption (m.s.f.) Total vacancy (%) 2008 2009 2012 2013 2016 2017 2010 2011 2014 2015 2018 2019 2020 2021 Class A cap rates are holding firm at around 6% 9% 8% 7% 5% 3% 4% 6% CBD Class A cap rate (%) New Jersey (Hudson Waterfront And Meadowlands) Table refers to overall market, while charts refer to Manulife submarkets Independent Market Report By JLL as at 31 December 2021