Flight to quality continues in NJ market.

Although a steady increase in activity has occurred since 1992 began, a large percentage of the movement has been through intra-county relocations rather than corporate expansions. Businesses continued to take advantage of the soft market conditions by upgrading into better quality facilities at a comparable price.

Despite the 957,900 square feet of new construction completed during the quarter, for the first time since mid-year 1989, the overall vacancy rate decreased. Furthermore, as there is no planned speculative construction in Northern or Central New Jersey, this trend is expected to continue throughout the remainder of 1992. The only new construction expected to be delivered this year is Bristol-Meyers Squibb's 600,000-square foot complex at the Princeton Forrestal Center in Plainsboro.

Once again, the Hudson County Waterfront displayed strong activity as it continued to draw tenants from New York. In particular, Dean Witter signed for 162,000 square feet at Jersey City's Harborside Financial Center, relocating employees from elsewhere in Jersey City and from Manhattan while PR Newswire Associates also relocated from Manhattan leasing 23,086 square feet. In addition, the waterfront received attention as New York University announced it will construct a $3 million sports complex in Weehawken as part of their decade-long, $250 million expansion program. The nine-acre site, donated by the Hartz Group and Arcorp Properties, is situated between Hartz's Lincoln Harbor and Arcorp's Port Imperial Landing. In exchange for the property, the university will open the complex to all Weehawken residents and provide a variety of athletic and educational programs.

Corporate consolidations continued during the second quarter as Prudential Insurance Company, the nation's largest insurer, announced it will close its Parsippany office by October of this year.. Although 1,000 employees are affected, 500 employees will be relocated to the company's Woodbridge office; while 100 workers will be differed a transfer to a new office which is planned to open in Rockland County, New York, and 400 will be cut from their workforce.

On a more positive note, the prestigious Mall at Short Hills, jointly owned by Prudential Realty Group, recently announced plans to open a new mall wing, adding approximately 35 stores. Among the upscale new stores will be Neiman Marcus, Nordstrom and Saks Fifth Avenue. Demolition of the former B. Altman & Bonwit Teller buildings will begin next spring while the construction of the additional 200,000 square feet is expected to begin late 1993. Although the expansion will not be complete until the fall of 1995, retailers are confident the new stores will attract more shoppers and improve business throughout the 1990's. Similarly, Prudential's Office Center at Short Hills was active this quarter as leases totalled more than 40,000 square feet.

Public Service Electric & Gas, New Jersey's largest electric and gas utility, continued to expand within Newark, leasing an additional 102,000 square feet at Bellemead's newly completed One Newark Center. Serving nearly three quarters of the state's population, PSE&G recently established a non-profit foundation making a $1 million commitment to affordable housing in New Jersey. PSE&G's investment in the community will focus on project development loans within urban areas. While PSE&G hopes to further increase the utilization of its services through this project, the company aspires to challenge other corporations to become involved with the essential urban renewal of New Jersey. Likewise, the government has also responded to this situation.

Meanwhile, the second quarter 1992 came to a close with discussion of the 1993 state budget as the Republican Legislature overrode Governor Florio's $16 billion budget and adopted a $14.9 billion spending package, a 2 percent decrease from last year. Unfortunately, among the deep cuts imposed is a decrease in spending and salaries within the Department of Commerce which drastically reduces programs promoting New Jersey as an attractive place to do business. On the other hand, the budget's decision to reduce sales tax from 7 percent to 6 percent is expected to increase consumer spending. This, in conjunction with the decrease of the prime interest rate, should help spur economic development throughout the second half of 1992.