Certain submarkets continued to record up-ticks in vacancy, but there were a handful that experienced declines in the last three months as leasing activity picked up and less space was placed onto the market. During the fourth quarter, there were just nine blocks of space in excess of 40,000 square feet added to the market. The previous three quarters of 2009 averaged 15 such blocks of space made available for lease. Much of the diminishing space during the fourth quarter occurred in Bergen County, the Waterfront and Parsippany; all of these markets recorded more than a one-percentage point decrease in their vacancy rates, which now stand at 23.7%, 25% and 12.2%, respectively.

Although there was an increase in leasing activity during the fourth quarter, the year-to-date total was the lowest in recent history for New Jersey, with 8.2 million square feet leased. Renewals accounted for almost 40% of all fourth quarter leasing, including five of the top 10 transactions. This comes as little surprise, as there are still many tenants who are undecided or putting a hold on real estate decisions until the economy shows signs of improvement. Since a year ago, the overall average asking rental rate has fallen almost 5%, to $25.01 in Northern New Jersey and $22.54 in the southern part of the state, as space options continued to grow for tenants.

Clearly, the uncertain economic future has made cost containment a top priority for tenants. As a result, those deals that are getting done are mainly short-term renewals, says Jospeh Sarno, executive director of Cushman & Wakefield, based in Edison. "We're seeing fewer capital dollars available for companies to relocate into new spaces and fit out those spaces. So new leasing activity has been lower than in previous years."