Next is the office market, which must be broken down into two sectors--general office space and medical office space.

General office space has been helped by the fact that office product in New Jersey has been producing steadily over the past 25 years with virtually no peaks and troughs. However, rental rates across the state have been depressed due to the overall reduction in operating costs by many companies looking to cut costs.

And, companies today are finding that technology has enabled them to operate in less traditional office spaces (i.e., employees working from home, the move towards being greener and thus being a more paperless environment and the redesigning of more efficient office configurations), which has helped them spend less without affecting their ability to function at high levels. Therefore, it is a great time to be a general office tenant today with so many options to select from.

Medical office space differs from general office space mainly due to higher parking requirements demanded by municipalities, coupled with the additional construction costs to build out these facilities. In addition, there is an increase in demand for this type of space, given the increasing age of the Baby Boomer population and the companies in the healthcare industry that are servicing the doctors and the general population, which have come to rely on the goods and services being offered by this sector.

Thus, the only reason activity in this sector has been desolate over the past several months is simply because of the psychological affects that the current economic downturn has had on the minds of potential tenants, who have decided to be overly cautious due to the uncertainty with the direction of the world economy. Once that mindset changes, this sector is going to improve at a much faster pace than any other, with the exception of government related sectors.

The retail market has been hit the hardest during these tough economic times. Consumer spending is down, which has caused the rental prices to fall in some cases almost 50% from approximately $50 per square foot two years ago to somewhere in the mid- to high $20s today as a result of the high vacancy rates not seen in Northern New Jersey in over a decade. These prices can be obtained along Routes 4 and 17, and although things look grim today, retailers should take advantage of this unique circumstance in order to secure space in the best retail corridors in the country at reasonable costs that will not be available for long.

Just like in the industrial market, those ambitious tenants who can look beyond today's tough conditions and see that there is a bright future will be able to take advantage of these lower prices and lock in long-term leases that will produce great future returns on their investments.

Raw land is the only sector left to discuss and it appears that demand for raw land has been decimated due to the long, drawn out approval process required to develop land in New Jersey coupled with financing impossibilities and most importantly, buyers have the ability to purchase distressed assets at such a discount that they are getting the land for free. In other words, purchasing buildings that are in need of capital improvements at large discounts from replacement cost today, it does not warrant the purchase of land for new development.

The Road to Recovery
The stock market is on the rebound, and although it recovers much slower than it crashes, this slow and steady improvement is indicative of what will happen in the commercial real estate industry. Banks have virtually been frozen, and sellers and landlords have had unrealistic expectations of pricing. However, just like the economy, these recent trends are starting to turn around.

Landlords are now coming to terms with the reality that their properties are not worth what they were two years ago, and that if they want anything to happen, they must adapt to current economic times or they will be left high and dry with little or no activity on their available property. Banks will eventually loosen up and have to get back into the business of lending, as deals have to get done.

Ultimately, the difference with this recession and recovery, as opposed to previous times, is that the sellers and landlords no longer have the power to drive the market; rather, it is the buyers and the tenants that have leverage to use in negotiations. This is a realization that everyone in the commercial real estate industry has begun to accept and therefore the commercial real estate industry overall has only begun the long road to recovery.

Darren Lizzack is associate vice president at NAI James E. Hanson. The views expressed her are those of the author.