Office: Tenant Outlook Improves

Office tenants in Northern and Central New Jersey saw a sliver of hope during the fourth quarter of 2008 as the real estate market continued to turn in favor of tenants, with greater flexibility on the part of landlords and additional federal and state legislation.According to Studley’s fourth quarter market report, the Main Street Assistance Program and the Urban Enterprise Zone Enhancement Act–two state-backed programs passed in the fourth quarter–as well as the existing Urban Transit Hub Tax Credit Program, are three state-backed efforts designed to revive New Jersey’s business climate and economy.”Though New Jersey has seen little fluctuation in its commercial real estate market over the years, the environment of late has moved in favor of tenants,” says Studley vice chairman George Martin. “In addition to programs that are expected to create opportunities for New Jersey businesses, landlords have been more flexible in their lease negotiations, offering aggressive concession packages and lower rents to drive today’s slow leasing velocity.”As of mid-December, the report cited that overall leasing totaled 1.0 million square feet, a decline of 49.2% and 69.6% from the previous quarter and year, respectively. On a trailing four-quarter basis, activity dropped by 24.4% from last quarter and by 45.8% from third quarter 2007.”Many businesses halted their expansion or consolidation plans during the fourth quarter. However, for businesses that continue to grow, even modestly, or see growth in the near- or long-term, there are leasing opportunities that we haven’t seen in years,” says Studley senior managing director Philip Lipper, who adds that landlords are being especially aggressive to retain their tenants to avoid having to release any space into this environment.