Vacancy prompting investment activity.

Office building sales in northern and central New Jersey are on pace to exceed $2 billion for the third consecutive year--and for good reason.

With more than 200 million s/f of office product, New Jersey ranks as the fifth largest office market in the nation and is headquarters to 26 Fortune 500 companies--ranking the state third in the country.

Equally important to investors is the diverse nature of the companies that house themselves in our office parks and central business districts--insuring a steady stream of users, regardless of the woes of industry-specific economic conditions.

What may be surprising to some is the level of activity that has and continues to take place in the sale of buildings that are entirely or mostly vacant. In the first three quarters of 2005, 11 properties have sold and two more are under contract. Aggregating more than 2.9 million s/f, these properties are attracting both investors and users that consider this an ideal time to acquire an asset that can generate significant yields for an investor or provide a lower cost occupancy for their own use.

The demand for vacant buildings is a very positive sign that the office market in northern and central New Jersey continues to be a highly sought after location for users as well as investors. Of the 11 deals that have sold, five were purchased by user groups that intend to occupy the space. Most important is the influx of new jobs that the users will bring to the area. The largest transaction, Verizon's purchase of the 1.3 million s/f former AT&T campus in Basking Ridge, will result in 1,800 new jobs for the State. Time Warner's purchase of the 130,000 s/f building in Parsippany will represent almost 200 new jobs to the State as this facility will serve as general office for two publications and a data recovery center. Met Life's purchase of the 413,000 s/f building on Davidson Avenue in Somerset, has the potential of adding up to 1,500 new jobs. In Bergen County, a recent purchase by Southpole Apparel will result in about 400 jobs coming to New Jersey. A favorable by product of user purchases is significant positive absorption of space in the specific submarkets.

Most investors do not purchase vacant buildings with the hope of finding a single user to lease or purchase the entire facility. Instead, investors look to redevelop or reposition the asset to suit the needs of a multiple of potential tenants. Notwithstanding this labor and capital intensive game plan, investors are able and willing to pay close to user pricing and still realize a significant return on invested equity. In a market where existing cash flow is trading at a premium, some owners may be pleasantly surprised to find that their vacant buildings can be sold to the larger pool of investors versus users assuring a smooth and timely disposition program.

DAVID CSONTOS

SENIOR VICE PRESIDENT

INVESTMENT SALES DIVISION

GVA WILLIAMS NEW JERSEY