Office market strengthens on evidence of stability.

High energy costs, the potential economic impact of hurricanes Katrina and Rita, and general global uncertainty seem to be tempering optimism in the New Jersey commercial real estate market as we head into the final months of 2005. Yet perspective is key to maintaining a credible outlook, and it is important to think about our state in a national context.

We sometimes tend to underestimate the size, scope, diversity and, therefore, resiliency, of our economy. Our Gross State Product exceeds $430 billion.

If we were a nation, we would be the world's 17th largest economy, ahead of nations such as Belgium, Switzerland, Sweden, Taiwan and Saudi Arabia.

Last year, New Jersey boasted one of the best performing economies in the nation, and almost all of our employment sectors showed gains. Going into 2005, New Jersey showed incredible momentum. Since the end of last year, our state has added more than 25,000 jobs. In August, New Jersey's unemployment rate was 4.2 percent, marking its 28th consecutive month below the national rate.

Within this context, the office real estate market continues to show steady, albeit slow, progress.

Vacancy rates have remained stable through the first three quarters of 2005, increasing slightly from 19.1 percent at year-end 2004 to 19.2 percent today. Sublet space has continued to decline, and average asking rents have experienced a slight increase.

Year-to-date leasing reached 8.78 million square feet in the third quarter and is on pace to reach 11.7 million square feet by the end of the year, as compared to a total of 9.4 million square feet in 2004. Already, 12.1 million square feet of investment sales transactions have closed, reflecting a continued incredible pace in that sector. Further supporting these positive indicators, several new projects broke ground during the third quarter, bringing total current office construction to 791,931 square feet. At the beginning of the year, just 180,000 square feet of new development was underway.

Looking ahead, we must remember that it is not by chance that New Jersey continues to outperform other key markets in the nation.

It is not a coincidence that the Garden State is one of the most significant headquarters locations in the United States and that it is at the center of several major industry clusters--including life sciences and information technology. Twenty of the world's leading research-based pharmaceutical and medical technology companies maintain headquarters, major research and development, or major production facilities in our state.

Throughout the past several, volatile years, New Jersey's ability to attract and retain business of this caliber has been critical to its consistent strong economic--and real estate--performance. Yet we cannot take for granted that we will continue to enjoy the level of economic success that we have in the past. No one can take away the heritage of our prime eastern seaboard location, but we as real estate practitioners need to work to support our state's pro-business policies.

By continuing to augment New Jersey's natural appeal with competitive incentives, the state will be well positioned to continue its enviable legacy.

GIL MEDINA, EXECUTIVE MANAGING DIRECTOR

CUSHMAN & WAKEFIELD OF NJ