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C&W: Space Consolidation Impacts Office, Industrial Sectors

EAST RUTHERFORD, NJ-Look for the trend to continue through the remainder of the year before tenant movement begins to pick up in 2010.

By Alyson Grala | Updated on July 23, 2009

EAST RUTHERFORD, NJ-Space consolidation continues to have an impact on both the office and industrial markets in the second quarter, according to Cushman & Wakefield Inc. Gil Medina, the firm’s executive managing director in New Jersey, tells GlobeSt.com that space users working to stay afloat are targeting efforts to reduce overhead and consolidate space. This trend is expected to continue at least through the remainder of the year before the market regains stability and tenant movement begins to accelerate.

The overall office vacancy rate in Northern New Jersey, now 17%, has increased 0.7% since the first quarter of this year and by 0.8 percentage points from mid-year 2008. In Central New Jersey, the overall vacancy rate registered 20.7% at the close of the second quarter, a 0.4% increase since first quarter 2009, a 0.7% increase since mid-year 2008 and its highest point since year-end 2004.

“Year-to-date, overall net office absorption posted negative totals in nine out of the 11 counties Cushman & Wakefield tracks in the state,” Medina says. “Absorption is not expected to show positive numbers as more space is delivered to the market.”

In Northern New Jersey, the overall weighted average asking rental rate, currently $26.41 per square foot, has displayed modest fluctuation since first quarter of 2009, dropping by only $0.04 but still posting $0.66 lower than at mid-year 2008. Overall weighted average asking rental rates have moved downward in Central New Jersey as well, from $25.02 per square foot at mid-year 2008, to $23.75 per square foot last quarter, to $23.45 per square foot currently.

“Landlords, eager to negotiate deals, have begun to lower asking rents,” Medina notes. “Additionally, the recent onset of ‘negotiable’ listed asking rents will continue to pan out favorably for tenants, serving as a tremendous bargaining chip in the negotiation of new leases.”

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