Cushman: Seller's market is still strong.

Unprecedented demand for both office and industrial real estate in New Jersey has created a true "landlord's market" as we head into the second half of 2000. The continued emergence of dot-com and telecommunications entities, the growth of hoteling, and the thriving business environment in general have fueled the current real estate boom which is unmatched in its intensity and breadth.

New Jersey's labor shortage has also played a significant role in accelerated activity in and beyond the state's prime commercial centers. Companies are vying for space in regions with historically substantial labor pools including Morris, Bergen and Essex counties. At the same time, others have begun to tap into softer labor markets in areas further south and west of Manhattan, including Monmouth and Hunterdon counties. As a result, we are seeing stepped up demand throughout the state.

Within this context, rental rates have risen significantly. In the case of real estate that can accommodate telecom and Internet firms -- which have stringent building infrastructure specifications, and whose requirements for fiber connectivity and proximity to multiple major carriers limits them geographically -- rents have so much as tripled. Yet despite the high cost for desirable space, telecommunications companies remain among the most active industries in New Jersey, signing long-term leases and investing millions of dollars in equipment and infrastructure.

In the dot-com sector, nobody knows what will happen next. I believe that every landlord has questioned the longevity of dot-com tenants, but they have been willing to take the risk. A year ago, property owners were willing to take stock options as security, but those days are gone. Today, they demand a great deal of "real money" up-front, due to the high risk factor involved in the industry. In the short-term, we will see some dramatic changes as dot-coms close their doors, merge with other firms or are bought out.

Traditional brick-and-mortar companies, however, are playing the real estate game on a different field. With less sophisticated requirements, and a willingness to relocate to emerging markets, these organizations are still competing for space -- but without the same fervor as the high-tech entities. Still, the velocity of leasing activity throughout the state indicates that the market remains tight for all businesses looking to establish or expand their presence here.

INVESTORS LOOK TOWARD BROWNFIELD SITES AND INNER CITIES

Another notable trend involves the stepped-up sales, construction and leasing in areas that were previously thought of as undevelopable, such as Brownfield sites and inner cities. As a result, markets such as Perth Amboy and Newark are witnessing a surge in interest from investors and tenants for office and industrial facilities as well as the retail and residential sectors. This tried-and-true formula of balanced development is expected to elevate these areas as prime locations through the end of 2000 and beyond.

During the second half of the year, office development will continue to flow toward those areas with viable labor pools. Companies committed to establishing or growing in the state's prime markets will pay higher wages and higher rents-per-square- foot. Others will be motivated to relocate to less competitive regions north and west of the New York Metro area.

Within this landlord's market, savvy owners will look to capitalize on current conditions by growing their portfolios. By focusing on location, technological capabilities, amenities and positioning, they will see strong returns on their investments well into 2001 and beyond.