Those employment reductions have resulted in a slowing of leasing activity and concessions that have topped 4% of asking rents for the first time since 2003. Marcus & Millichap estimates that 105,000 jobs will be cut this year, a reduction of 2.5%. Northern New Jersey recorded the heaviest losses over the past year, with total employment in the region falling by 53,400 workers. There were 26,500 fewer positions in central New Jersey during the same period, while employers cut 17,300 workers in the southern portion of the state.

The largest year-over-year decline in employment was registered in the financial services sector, which shed 13,100 positions, a 4.9% drop. And, as Marcus & Millichap points out, consolidation among major pharmaceutical companies in the state means further job cuts.The statewide vacancy rate now stands at 4.7%, which represents a year-over-year increase of 110 basis points and an 80-basis-point rise in the first three months of the year. Continued softness in demand will eventually push the vacancy rate up 150 points to 5.4% by year's end, Marcus & Millichap asserts.

Although both asking and effective rents both climbed 2.2% in 2008, asking rents dipped 0.8% and effective rents shrank 1.2% in Q1. Looking ahead, Marcus & Millichap predicts that asking and effective rents are expected to retreat 2.1% and 3% to $1,280 per month and $1,229 per month, respectively, in 2009.