First-quarter reports on the New Jersey commercial office market were all spiced with unsavory adjectives like “weak,” “static” and “slow.” But one of the sourest comments concerned plain vanilla.

In a recent Cushman & Wakefield briefing, investment analyst Gary Gabriel said simply, “Vanilla suburban is a very difficult sell in today’s market.” Other analysts, brokers and developers were quick to agree. Last year’s office market activity was dominated by a handful of very large tax incentive-backed deals for new corporate space in urban centers, even as older class A buildings out in campus-land often went begging for buyers and tenants, they noted. The experts agreed that a “bifurcated” market, with juxtaposed trends, continued in early 2012.

One example of such juxtaposition: While a joint-venture partnership of SJP Properties and Matrix Development is set to start building slick new hyper-energy-efficient office towers in Newark (for Panasonic) and Hoboken (for Pearson), in Parsippany, Transwestern signed on as leasing agent and property manager for a 10-year-old former insurance company office that has been vacant for about a year. Transwestern will reposition the building, one of the newer class A facilities in a community where the average office property is 20 years old, so it can be brought to market for multiple tenants—but it faces the challenging fact that Parsippany had one of the highest first-quarter vacancy rates in Northern New Jersey.

While it’s true that the state’s entire office market is hurting—the overall vacancy rate is about 24%, the highest since 2004—vacancy declined to 10% or less in urban locales such as Jersey City and Newark, according to Q1 reports. Meanwhile, it rose or remained as high as 30% in Parsippany and other office-campus havens. The traditional fare of “bucolic campus” environments demonstrated weakened appeal despite post-recession rents in the low $20-per-foot-range and sweetened tenant options…

…For the rest of the story, go to the May 2012 issue of Real Estate Forum.

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