"Despite the signs of weakening during the past three months, the Garden State isn't breaking," says Gil Medina, Cushman & Wakefield's executive managing director in New Jersey. "Office vacancy rates are for the most part holding steady, and several notable transactions have been made recently."
As far as those deals, Reckitt Benckiser expanded to a total of more than 163,000 sf at Morris Corporate Center IV; Arch Insurance took nearly 107,000 sf at Harborside Financial Center III in Jersey City, in a move from Roseland; and HSBC renewed for 110,000 sf at 200 Somerset Corporate Blvd. in Bridgewater. And as far as vacancy rates, according to C&W's numbers, they were up a bit in North Jersey to 16.4%, and actually down a bit to 19.8% in Central Jersey.
But Stephen Jenco, VP-client services manager for Grubb & Ellis, is concerned about back-to-back negative absorption in the last two quarters, fueled by "the absence of expanding corporate real estate requirements. Against the backdrop of the sluggish economy, many business sectors remain reluctant to make new capital investments and instead have been utilizing existing resources to boost output, thus curbing the corporate appetite for additional office holdings."
Compared to C&W's numbers, Grubb & Ellis' figures put the North Jersey vacancy rate at 19.4%, with the Newark CBD/Essex East, Hudson waterfront and Short Hills/Route 24 submarkets the only ones in single digits. The figure for Central Jersey is 22%, down two points from a year ago. The one area with positive Q3 absorption, says Jenco, is Princeton's 12.7 million-sf submarket, which was on the plus side by 153,100 sf.
Not all sectors are lax, says Matt Dolly, director of research for GVA Williams NJ. There is some movement from the life sciences, data center and medical sectors. And generally speaking, he says, "the market is characterized by a slight increase in vacancies, but also an increase in asking rents. We haven't yet seen a drastic increase in vacancies, but to maintain activity, it seems likely that heading into 2009, effective rents may start to fall and landlords will continue to offer more flexible lease terms."
"Until there are considerable signs of economic improvement, tenants in some markets will continue to benefit from their stable renewal options, rather than procure new deals," C&W's Medina adds.
And Dolly's own take on vacancy rates puts the number at 17.24% in North Jersey, a slight increase from the previous quarter. Central Jersey came in at 19.7%, stable from the earlier quarter. He concurs that Princeton is one area that remains active, "and interest in Newark continues to remain strong. The overall market is still experiencing some activity among smaller tenants, but there is definite reluctance for companies to make long-term commitments in the current climate."
And Grubb & Ellis' Jenco issues a caution on jobs, particularly fall-out on the financial front, where New Jersey has upwards of 270,000 jobs. "Many economists anticipate that financial job losses could be well above the 16,000 jobs that New Jersey has shed in all sectors since the beginning of the year," he says. "Employment losses are likely to be followed by the consolidation of excess office space."
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