In northern New Jersey, rents were up for Class A space in prime locations; on the other hand, several large spaces came to market and the vacancy rate rose by a full percentage point to 21%, according to C&W.

Central New Jersey performed better in both leasing and absorption for the quarter. C&W described “healthy leasing” in the I-78 Corridor, Princeton and Metropark submarkets.

The biggest Q4 transaction was in central Jersey's Bridgewater, where Valeant Pharmaceuticals took 310,000 square feet at Somerset Corporate Center. Another notable transaction was NRG Energy's long-term, build-to-suit lease for a 130,000-square-foot office in Princeton.

Central Jersey's office vacancy rate held steady at 17.8%, she said.

Challenges in the North

In northern New Jersey, leasing dipped by 17% quarter-over-quarter in northern New Jersey, with about 965,000 square feet in new transactions. The amount of space coming available in the quarter outpaced demand in quite a few submarkets, Brennan noted.

There was rising demand at the Hudson County waterfront – where rents are the highest in the state - whch reversed the recent trend there.

“While not back to the historical activity levels we had seen, the waterfront submarket saw more than 200,000 square feet in activity for the first time since mid-2012,” Brennan said.

Three of the five biggest leases in northern Jersey were for waterfront property. Two of the tenants in those deals – Orthodox Union and VF Sportswear - used new incentives established with the Economic Opportunity Act put in place at the end of the year to secure deals for waterfront space.

Bergen County continued to see strong demand in Q4 and finished the year with total leasing of nearly 1 million square feet. In Morris County, Q4 activity slowed from Q3, but the county had almost 1.4 million square feet of new leasing in 2013.

In Newark, a long-foreseen bloat in supply began to materialize at the Gateway Center, as Prudential made available 460,000 square feet at 2 and 3 Gateway Center in anticipation of its move to a build-to-suit office a few blocks away.

In Jersey City, Goldman Sachs put more than 300,000 square feet on the market at 30 Hudson St.

“Newark and the Hudson Waterfront accounted for the majority of the negative absorption in Northern New Jersey during the fourth quarter, although most of the northern counties saw available space rise at some level,” Brennan said.