C&W midyear report touts continued New Jersey growth.

Cushman & Wakefield Research Services has issued its MID-YEAR 2000 MarketBeat Update for New Jersey, detailing the key office and industrial trends responsible for the state's outstanding commercial real estate marketplace.

THE OFFICE MARKET

The first half of 2000 in the office market can be simply classified as phenomenal, according to the report. As the tightening market continues to frustrate users seeking quality space, landlords and developers have dictated the market, positioning themselves to command higher rents while they reposition and renovate older properties, and move rapidly ahead on new construction.

"The healthy local economy and the tight Manhattan market is propelling an unprecedented wave of demand, and cities such as Jersey City and Newark are booming and becoming revitalized by significant investment," noted Donald P. Eisen, executive managing director, New York Area. Unquestionably, the hottest office market leading this charge is the Jersey City Waterfront. Known as "New York's sixth borough" or "Wall Street West," Jersey City is experiencing new construction and renovations at a "sizzling pace."

Newark is also making remarkable progress with its extensive fiber optics network, excellent infrastructure and transportation system. As a result, e-commerce, telecommunications and engineering companies are settling into the city's older masonry buildings, where space is available and rents are cheaper. At the same time, developers continue to pump millions of dollars into these class B and C buildings.

In general, office construction activity continues to surge statewide, resulting in more than 1.5 million square feet of new product so far in 2000. Currently, more than 5.4 million square feet is under construction, a 39 percent gain over levels posted a year ago, with activity centered in the waterfront and Morris County.

The pent-up demand for office space and boom economy sent market indicators to their best levels in years. The overall vacancy rate dropped to less than 10 percent with the tightest markets in Hudson and Monmouth counties. After a quiet period for a few years, the Route 78 Corridor has re-emerged as a prime area for growth while to the south, Princeton will remain tight with new projects built to satisfy demand.

The investment arena also was active, with several properties changing ownership including two large portfolio sales: a seven-building acquisition by Crow Holdings and Invesco from Lincoln Equities, and a six-building purchase by JP Morgan from Gale and Wentworth.

THE INDUSTRIAL MARKET

The red hot first half of 2000 produced impressive figures indicative of the strength of the industrial market as well. According to the report, during the past 12 months, available supply sharply declined from 55 million to 36.8 million square feet, representing a 33 percent drop. Average asking rents increased to $5.82 per square foot, up $.69 per square foot since mid-year 1999. In addition, more than 1.1 million square feet of new construction product was delivered.

"The explosive growth of telecommunications, web hosting and e-commerce companies is rapidly changing the industrial landscape across the nation and in New Jersey," Eisen said. "Rising from the dead, once forgotten and abandoned old industrial buildings and sites are back in the spotlight and are considered prime locations for high-tech firms that cannot afford to wait for new construction."

Enormous demand is also being generated by big-box users, causing a scramble for modem warehouse space. Robust demand also produced stellar leasing activity for 13.2 million square feet in the second quarter. And construction activity registered an impressive 5.7 million square feet during the first half of the year.