For example, "what we're seeing in the housing market for the first time in decades is deflation," Hersh told interviewer Michael G. Desiato, VP of Real Estate Media Division of ALM, and the event's more than 650 attendees. "The excess inventory and creation of subset markets have created a loss of value in housing. That subset is facing the inability to move product and is competing with national homebuilders and public companies, and that's putting pressure on the industry.

"And we're losing employment in the financial services," added Hersh, which creates a need for the Federal Reserve "to stimulate the economy. The question remains whether they can ward off inflation while simultaneously protecting the financial markets. The jury is out. When a deflationary environment exists, it changes psychology."

For Mack-Cali, which made a strategic decision to pull out of markets outside of the Northeast several years ago, Hersh explained the company's vision is, "to expand our presence from Washington, DC to Boston." And the firm is focusing on urban areas: "I subscribe to the notion that the wealth, intellectual and human capital that exists, and the macro-economic environment that affords diversity of opportunities in the Northeast is unparalleled. I prefer not to invest in markets with low barriers to entry."

And he's bullish on New Jersey, asserting that while there are "structural" problems, "the state has a lot of potential. We have a huge immigrant population that can continue to make major contributions to our economic vitality, civility and culture."

That said, "in New Jersey we need to improve our higher education system," Hersh continued. "We need to create more of a research centric focus so we can compete with places like Boston, Cambridge, Virginia and California. It won't take much more than a resolve and a commitment to accomplish that because we have the population base."

And in general, New Jersey has been reactive rather than proactive, said Hersh. "Major missteps have occurred in terms of fiscal public policy," he added, pointing to the so-called "millionaire tax" as a "disincentive for business, especially intellectual property-type companies. The state felt it was the most expedient way to bring more money into the treasury, and that was the single most irresponsible act taken by the state. Proof positive is that last year we lost 2.5% of our pharmaceutical work force. We've lost the engine of growth, but it's not too late to fix it. There are corrective measures that can be taken."

But there are opportunities amid the adversity, and Mack-Cali remains selective about its development plans, he confided. The firm is currently building several corporate headquarters including the 250,000-sf facility for Wyndham Worldwide in Parsippany.

"We'll pick our spots," he concluded. "In the '80s we more than doubled our inventory from 70 million to 165 million sf of A and B office product in the state, but in the past five years we've added virtually nothing. As excess inventory ages, there will be more development and redevelopment opportunities going forward."