Diverse office market remains flat in northern Jersey.

The office market in Northern & Central New Jersey remained flat during the first quarter of 2007 according to the Studley Report: Studley Office SpaceData Report.

Absorption was slow but steady. Only the Waterfront saw sizeable blocks of space leased with most tenants migrating from an overcrowded Downtown Manhattan market.

The report notes that development activity throughout the state is not necessarily contingent upon space demand. For instance, the Princeton submarket, which has historically been overbuilt and currently has a high 16 percent Class A availability rate, has 10 buildings currently under construction. Conversely, the Hudson Waterfront--with a 13.7 availability rate--has several million square feet of projects proposed, but landlords in the Waterfront submarket remain cautious. Those projects will not break ground until a major tenant commits to leasing.

"Fueled by a tightening Lower Manhattan market, the Waterfront remains one of the state's strongest markets," explained Philip Lipper, corporate managing director in Studley's Central New Jersey office. "A strong Dow bodes well for the Waterfront because a strong Wall Street also makes for a strong Hudson Street, a key office address within the submarket. Building within Jersey City will continue as demand for easy access to Manhattan remains, and Jersey City and Hoboken offer unrivaled convenience."

"As for overbuilding in Princeton, developers are bullish on the market because of its excellent demographics, educated workforce, quality of life and location equidistant to both New York and Philadelphia," said Robert Bull, executive managing director, also in Studley's Central New Jersey office.

"Historically, large corporations have gravitated toward Princeton. However, because of excessive construction, the leasing market is expected to continue to soften over the next 24 months."

The Studley Report also notes the diversity of the New Jersey market, which is an amalgam of unique submarkets having little or no impact on one another. For instance, though located within bordering counties, the Metro Park/Woodbridge market is quite distinct from the Princeton market. In contrast to its overbuilt neighbor, the Metro Park/Woodbridge market is experiencing single-digit availability without any new construction in progress. The only large block of space currently available is a sublease space--BASF's 270,000-square-foot office at 101 Wood Avenue South. With net rental rates topping $30 per square foot, this market is expected to remain fully leased and stable over the next 12 to 24 months.

"New Jersey is locked in the throes of a problematic economy," said Mr. Lipper. "Now more than ever, New Jersey's office submarkets are linked to the prosperity of the New York economy. To emerge as an independently viable economy, New Jersey Governor Corzine must implement measures to dramatically improve the business-friendliness of the state's tax structure.

With its highly educated workforce, abundant desirable housing, quality schools and excellent transportation infrastructure, the state should again become a primary choice of leading corporations for headquarters and/or satellite office locations."