However, the analysts say uncertainty over the cliff has already contributed to the lackluster market conditions in northern Jersey and to an economic slowdown in the central section of the state.

The North has nonetheless had intermittent job growth throughout 2012, which indicates a recovery has begun. In central Jersey, by contrast, the office real estate market posted negative absorption of 724,000 square feet of office space in the third quarter, clear evidence there has already been an economic setback. (Cassidy Turley's analysts did not scrutinize the less commercially developed southern part of the state.)

“The fiscal cliff could derail northern New Jersey's recovery before it even gets off the ground,” according to the study, which reports that federal spending accounts for 15% of gross metropolitan product in the sector.

The scheduled tax increases on higher income brackets would have significant impact, affecting 10.4% of the northern Jersey residents. That part of the state has the 4^th-highest share of such income earners among 30 metropolitan areas surveyed.

If the cliff scenario occurs, the northern market would add about 583,000 square feet of office vacancy in 2013, according to Cassidy Turley's projections. Vacancy would rise about .4% and rents would fall by nearly 1%. On the other hand, if the cliff is averted and policymakers manage to agree to scale back the cuts and tax increases, the economy for northern NJ is poised to expand by 2.9%, generating more than 10,100 net new jobs. In that case, office real estate would record its first year of positive absorption since 2007, and vacancy would begin to erode, according to the report.

In central Jersey, where federal spending is a somewhat bigger factor – it currently amounts to 17% of GMP – the cliff scenario would generate a mild recession in the first half of 2013, Cassidy Turley says. That would mean a loss of about 5,500 jobs in the metro area, causing office vacancy to rise about .9%

Close to 9% of central Jersey households earn more than $200,000 per year, exposing them to the planned tax hikes. “The tax increases, should they be allowed to occur, will undoubtedly constrict consumer and corporate spending, which will hinder office space demand,” conclude the analysts.