• Vacancy increased slightly in Hudson Waterfront year-over-year due to a construction completion but has been declining across the overall New Jersey market. • Net absorption has been positive for two consecutive years. • Sublease availability remains relatively elevated at 6.3% but declined 300 bps compared to Q4 2024. • Limited developable land, combined with demand for new warehouse space and residential developments, will continue driving the demolition of vacant, outdated office buildings throughout the state. New Jersey (Hudson Waterfront) Office Market Trends One smaller construction completion pushed vacancy rates up marginally in 2025, but Hudson Waterfront recorded positive net absorption for the second consecutive year, and vacancy is declining in the broader New Jersey office market. Leasing activity was relatively slow as expiration-driven deals slowed and limited availability remains on the market for relocation activity, but leases that did occur generally saw stable or expanding footprints, pointing to continued positive net absorption in 2026. Sublease availability improved significantly over the course of the year with nearly 200,000 s.f. of availabilities coming off the market. While a flight to quality is still evident with rental rates in Hudson Waterfront, location dynamics are seemingly taking on more importance relative to other markets in the U.S. Rents continue to grow marginally in Class A stock, while Class B rents have declined marginally, but occupancy stands at 82.4% in Class B supply and grew by 160 bps in 2025, while Class A occupancy is just 67.2% and improved by only 20 bps in 2025. Moving forward, flight-to-quality migration will accelerate amid more Class B lease expirations in 2026, as tenants prune outdated workspaces and relocate into newly constructed or recently-renovated buildings offering premium amenities. Outlook Hudson Waterfront has seen net expansion for two consecutive years, which is expected to continue in 2026 as Finance leads major office-using sectors in job growth. However, vacancy rates remain much higher than the broader metro area due to consolidation that has occurred since the outset of the pandemic. Overall vacancy rates will remain somewhat elevated as tenants flock to amenitized Class A stock, with older Class B and C buildings seeing limited uplift. Another recurring theme will involve the redevelopment of sites housing vacant, outdated office buildings to alternative uses. More than 8.5 million s.f. were removed from office inventory during the past five years. An additional 1.6 million s.f. are forecasted to be demolished in 2026, with nearly 90% of this office product being replaced by new warehouse and residential developments. Investment sales for office assets remain highly discounted due to this dynamic, with very few buildings trading with the intent of maintaining the building as office. MUST's Submarkets Overall Market Statistics Forecast 2025 net absorption (s.f.) 719,882 Under construction (s.f.) 0 Total vacancy (%) 26.2% Sublease vacancy (s.f.) 5,805,505 Asking rent (US$ p.s.f.) US$31.44 Concessions Stable Rental Rates and Going-in Yields CBD Class A cap rate (%) Cap rate Asking rent 9% 8% 7% 6% 5% 4% 3% $48 $45 $42 $39 $36 $33 $30 $27 $24 2010 2014 2018 2012 2016 2020 2022 2024 Hudson Waterfront Rest of Market 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 6.2M 6.0M 5.0M 5.9M 4.0M 4.9M 5.1M 4.4M 5.6M 5.7M 1.6M 0.3M 1.2M 1.4M 0.8M 0.3M 0.6M 0.9M 1.1M 0.7M Net Absorption and Overall Vacancy Rates Gross Leasing Activity 1.0 0.5 0.0 -0.5 -1.0 -1.5 35% 30% 25% 20% 15% 10% 5% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Net absorption (m.s.f.) Total vacancy (%) / 41 / MANULIFE US REIT
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