The office availability rate throughout this ten-county region decreased slightly to 23.87% at the end of December, from 23.94% in the third quarter, with tenants more inclined to start the initial relocation/renewal process than in the past few quarters.
Meanwhile, FirstService Williams research shows that landlords are continuing to list rents as negotiable as overall rents decreased to $23.51, down from $23.90 the previous quarter, and lease executions are still taking longer than historical norms.
The perception of a number of tenants is that overall office market conditions will continue to decline before improving, with very few compelling reasons to relocate in what they still see as a soft market. In response, some landlords are continuing to offer rent concessions and, overall, are more inclined to execute short-term leases, enabling them to ride out the tenant's market while collecting rent rather than locking into long-term, discounted rental rates.
"We are cautiously optimistic that the market is showing the early signs of recovery, but most tenants and landlords have not quite come around yet," says Matt Dolly, managing director of research and marketing for FirstService Williams New Jersey. "Most tenants are in a position to wait, while others may simply have to because their businesses are struggling or they are unable to obtain loans to finance a relocation or expansion. At the same time, landlords are being more flexible in negotiations, but expect improvements as 2010 progresses."
There is a general optimism that the economy is on a path to recovery. The overall national pace of job loss has slowed. According to the National Association for Business Economics, unemployment will start to drop in the first quarter of 2010, but the real sign of positive momentum will come when employment starts to increase, as demand for office space will follow.
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