Office: Running on Empty

The fuel gauge needle on the Northern and Central New Jersey office market dashboard display slipped another notch lower during the third quarter in the absence of additional fuel supplied from expanding corporate real estate requirements. Against the backdrop of the sluggish economic climate, many business sectors remain reluctant to make new capital investments and instead were utilizing existing resources to boost output, thus curbing the corporate appetite for additional office holdings.

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.