“There are many positive attributes that Central New Jersey has to offer in the office market, including its prime location between Philadelphia and New York,” Simon says. “However, major drivers for office demand have included the pharmaceutical and life sciences sectors. This area has been a hub for pharmaceutical headquarters for a long time and continues to attract small and mid-size pharmaceutical companies as well.”

On the other hand, the northern portion of the state experienced its second consecutive quarter of decreasing demand, with vacancy rising to 14.5% from 14.3% in the second quarter. The region saw 339,408 square feet of negative absorption, with class B space accounting for 92% of the total. The Hudson waterfront, however, saw 120,344 square feet of positive absorption.

Don’t expect these trends to change anytime soon, Simon adds. “These trends will continue into 2012 as companies continue to adjust to market conditions and focus on maximizing profitability. Flight to quality transactions will remain prevalent, with class A assets outperforming class B, older generation buildings,” Simon predicts. “In addition, vacancy rates will decline, although the progress will be slow, and average asking rates will stabilize as landlords and tenants close the perceived gap between market values.”