Positive absorption witnessed earlier this year in the Northern and Central New Jersey office market had since yielded to negative absorption figures, as limited demand was losing ground to additional availabilities generated by consolidations and restructurings. After posting nearly 284,900 sf of negative net absorption during the second quarter, an additional 434,500 sf of negative absorption occurred in the third quarter. This represented the highest volume of quarterly negative absorption in four years.

The Northern and Central New Jersey office availability rate subsequently eclipsed the 20% mark in the third quarter compared to 19.8 percent at mid-year. The overall office availability rate had not been above 20% since early 2007. Nearly 30.6 million sf of direct and sublet space was being marketed in the Northern and Central New Jersey office market during the third quarter of 2008 compared to 29.7 million square feet available one year ago.

With its close proximity to Manhattan, New Jersey has historically housed the back office and data center operations for many of the world's leading financial services firms. The Hudson Waterfront is often dubbed "Wall Street West" because of the large concentration of financial related firms located in this submarket.

The recent meltdown witnessed in the credit markets that have claimed such investment titans as AIG, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley is anticipated to initially impact the unemployment rate as companies reduce their payrolls in the months ahead. While the New Jersey unemployment rate climbed to a five year high of 5.9 percent in August, current unemployment figures do not reflect the recent turmoil engulfing the credit markets. The financial services sector employs nearly 270,000 workers in the Garden State and occupies more than 20 million sf of office space. Many economists anticipate that financial-related job losses could be well above the 16,000 jobs that New Jersey has shed in all sectors since the beginning of the year.

Employment losses are likely to be followed by the consolidation of excess office space. A rising wave of available sublease space is often the byproduct of such consolidations. While nearly 6.7 million square feet was being marketed for sublease in the Northern and Central New Jersey office market during the third quarter of 2008, the volume of sublease space could trend higher in the coming year as firms re-examine their real estate holdings in an effort to reduce operating expenses.