The main conclusion? The market impact of Sept. 11 was to bring the amount of available sublease space down some, and overall the market is holding its own. "While there has clearly been a slowdown in the economy, which obviously began before the September 11th tragedy, the commercial real estate market's fundamentals remain strong," comments Stanley Simon Newmark JGT CEO.
"And, in fact," Simon continues, "those factors have created opportunities for tenants, investors, developers and service providers." He points to the lack of new spec development, a more balanced market for tenants and moderate price adjustments as key factors in keeping the market stable.
"The slowdown in the national economy and depressed corporate earnings have hit the New Jersey market," Simon concedes. "But the effects haven't been dramatic, and pale in comparison to the downturn of the late '80s and early '90s. In fact, the correction in the economy has created a more balanced market for tenants, who are finding it easier to relocate or expand within the state."
According to the Newmark JGT report, average asking rents for office product have declined moderately this year. And while year-to-date negative absorption of more than two million sf has sent vacancies up, the areawide rate for the northern part of the Garden State was still less than 10% at the end of 3Q. And of the approximately 20 million sf of office space available, about 25% of it is sublease space – which means that someone is still paying rent on it.
Still, sublease space has shrunk, he reiterates, mostly because of Sept. 11, and most of that shrinkage has come on the Hudson waterfront. "Over one million sf of sublet space has been absorbed, causing vacancy rates to fall as a result of demand created by September 11th," according to Simon.
Finally, Simon says, the pharmaceutical industry, long a mainstay in the state's economy, "continues to take the lead in leasing space. This expansion will temper some of the slowdown from the telecommunications sector as two of the state's larger firms continue to retrench and restructure." The two, of course, would be AT&T and Lucent Technologies.
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