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Office Slump Less Pronounced in 2010

PARSIPPANY, NJ-Despite a recent decline in available office space, renewals still account for a sizeable chunk of the lease transactions.

By Alyson Grala | Updated on January 14, 2010

PARSIPPANY, NJ-After seven consecutive quarters of climbing, available space in New Jersey fell for the first time in two years, though direct available space remained flat since last quarter. According to the report, sublease space dipped by over 200,000 square feet, pushing the overall vacancy rate down to 26.1%.

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.

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