According to Matt Dolly, FSW's New Jersey-based managing director of research and marketing, the market is still in "wait-and-see" period until it is clear which direction the economy is going. He tells GlobeSt.com that we've yet to see the bulk of expected new sublease space. "While we are seeing pockets of shadow space, there haven't been a lot of reductions in space just yet, but it seems imminent."

While there is a perception by tenants that the market will continue to struggle in the near term, Dolly says that there has been a noticeable uptick in activity in the last 30 to 45 days. "More tenants in the market are going out early, but this may result in two to three year early renewals/extension," he says. Many tenants are reducing the term on their deals and looking for better deals on renewals, with "blends and extends" also becoming more prevalent.

According to its research, FSW is also beginning to see slightly longer term leases in some areas. "Those who choose to move can strike a very competitive deal because of the surplus of space," Dolly says, adding that there is a flight to quality in some areas where tenants are willing to make a move. "In other areas," he says, "tenants will stay in lower priced buildings, even where rents are lowered because they need to lower costs wherever they can."

As for landlords, they're feeling pressure and reaching for deals now, with many becoming more flexible and agreeing on one to two year deals for good credit tenants. "Asking rents are being lowered in areas of the state, with some landlords listing rents as negotiable and then lowering rates at the table," Dolly says. The credit worthiness of landlords will continue to be critical in 2009.

Some bright spots include the medical and education sectors, which continue to show growth. Interestingly enough, Dolly says, there appears to be more office leasing activity in the Bergen County market. New Jersey is also making a large push to actively recruit cost-conscious companies from New York.

Overall, Dolly notes that the numbers were essentially flat for the quarter. "We haven't really seen the fallout yet," he says. "Garden State unemployment figures are around 8.2%, but there's a nine to 12 month lag when it comes to the vacancy and availability rate. Our market is reactionary," he adds. Dolly predicts that numbers will be flat for the next two quarters and will begin to show movement in fourth quarter 2009 at the earliest.

Other findings include:

Annual Trends: 1Q2008 to 1Q2009
Availability Rates:

  • Overall availability increased from 20.51% to 21.44%;.
  • Northern NJ availability increased from 18.82% to 19.79%;
  • Central NJ availability increased from 23.00% to 23.85%;
  • Availability rate increased in five of 10 counties;
  • Sublease represents 20.39% of total available space, decreasing from 22.95%;
  • Sublease space decreased in six of 10 counties.

Asking rents (all number Gross + TE):

  • Average asking rent decreased from $24.52 to $24.46;
  • Northern NJ asking rent decreased from $25.30 to $24.61;
  • Central NJ asking rent increased from $23.53 to $24.27;
  • Asking Rent decreased in five of 10 counties.

Quarterly Trends 4Q2008 to 1Q2009
Availability Rates:

  • Overall Availability increased from 21.24% to 21.44%;
  • Northern NJ Availability decreased from 19.94% to 19.79%;
  • Central NJ Availability increased from 23.13% to 23.85%;
  • Availability rate increased in five of 10 counties;
  • Sublease represents 20.39% of total available space, decreasing from 20.43%;
  • Sublease space decreased in six of 10 counties.

Asking rents (all number Gross + TE):

  • Average asking rent decreased from $24.77 to $24.46;
  • Northern NJ asking rent decreased from $25.38 to $24.61;
  • Central NJ asking rent increased from $24.04 to $24.27.
  • Asking rent decreased in eight of 10 counties.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM Digital Member, you’ll receive:

  • Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

National