Small to mid-size transactions dominate NJ market.

Small and mid-size transactions have become the norm in the New Jersey office market lately, unlike the many large-scale transactions of 1993 and early 1994. The lack of larger transactions has resulted in total leasing velocity of 7.17 million square feet for the past 12 months - approximately one million square feet less than a year ago, according to the Edward S. Gordon Company's Spring Office Market Report.

Despite limited leasing activity, the positive absorption generated during the year ending March 31, 1995 helped to further erode the supply of available space which now stands at 16.1 percent. The availability rate has continued to decline since reaching its apex of 19.3 percent in 1992.

The recovery of the New Jersey market is due primarily to the improving employment picture which is apparent in the broader sub-market activity, with 14 of the 20 sub-markets tracked by ESG exhibiting a decline in available space. Two sub-markets led the way and showed notable progress: Morristown, whose availability rate fell by four percentage points and now stands at 10.4 percent; and Western I-80, where available supply decreased by 50 percent and now stands at 11.8 percent.

The Waterfront sub-market continues to lead in positive absorption, totaling 280,000 square feet during the past 12 months. In the past two years, the Waterfront sub-market has been a hotbed of activity, causing the availability rate to drop from 27 percent to 12.2 percent.

Princeton and Route 278/78 Interchange also displayed very low availability rates, 9.9 percent and 8.3 percent respectively. ESG considers a sub-market in balance between supply and demand at roughly 10 percent.

Although many of New Jersey's sub-markets are showing improvement, sub-markets such as Palisades and Greater Monmouth County are experiencing dramatic increases in vacancy rates due to the departure of large users.

Only 39 percent of the year's total leasing velocity occurred in the last six months. Route 278\78 Interchange led all sub-markets with 760,000 square feet of leasing velocity, due to AT&T's planned relocation to Warren Township in late 1995, which accounted for 85 percent of the activity in the market. Parsippany, which witnessed a 28 percent increase in leasing activity, was a close runner-up with over 750,000 square feet leased. Parkway Corridor followed closely with 730,000 square feet leased.

"Like many suburban markets, New Jersey has been experiencing its share of the "flight to quality" trend that has emerged during the past several years," noted Thomas V. Bermingham, executive director of ESG's Saddle Brook office. "The limited remaining Class A supply has resulted in a surge in aggregate leasing within Class B buildings for the second consecutive year. Absorption has been hampered by the presence of several large buildings which either will not or cannot be divided for smaller users."

Overall average asking rents have remained steady at $19.24 per square foot. The Chatham/Milburn/Short Hills sub-market continues to boast the State's highest rents, nearly 30 percent above the market average.