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Elusive tenant demand in NJ office market, study shows.

New Jersey's office market was unable to gain traction during the second quarter of 2003. An improving economic picture, however, points to signs of optimism for the future. While still below average, leasing activity has increased somewhat. Also, both the amount of sublease space and the supply of large blocks of space have been gradually shrinking, relates a recent quarterly report issued by national commercial real estate services firm Studley.

"We're not totally out of the woods yet, but tenants have finally stopped shedding space--and in a few instances have even taken sublease space back off the market--representing a first step towards reviving demand and a sign of good things to come," reports Studley's New Jersey Branch Manager George J. Martin.

During the second quarter, the supply of the state's sublease space dropped by 100,000 SF, as six of New Jersey's 13 submarkets registered less sublease space than in the first quarter. Leasing activity also picked up by approximately 100,000 SF over the previous quarter.

Princeton alone accounted for nearly 25% of metropolitan New Jersey's leasing activity for the second quarter. Strong activity was also seen in West Bergen County, where transactions totaled 200,000 SF, followed by Monmouth County (182,000 SF), Middlesex County (172,000 SF), and Morris County (134,000 SF).

In other positive news, large available space blocks have been taken off the market with major transactions from Tyco International, Telcordia Technologies, Paragon Federal Credit Union and Affiliated Computer Services. These transactions have helped to offset the surge of availabilities during the second quarter.

For the quarter, the state's overall availability rate rose 1.1 percentage points fueled by large increases in available Class A office space. More than a third of the increase in available space was contributed by Middlesex County. Additionally, the Meadowlands, Morris, Monmouth and Suburban Essex submarkets each added more than 200,000 SF during the quarter.

The Waterfront's direct availability rate remains almost non-existent at 2.1%, while its sublease availability rate climbed to 12.8% during the second quarter.

However, the reopening of the PATH connection to Lower Manhattan, scheduled for November, will help to revive this market.

Conversely, Princeton posted a large decline in availability while much smaller declines were registered in Wayne/Paterson, Urban Essex County and the Route 22/Parkway Corridor. The amount of sublease space in the overall market has decreased, although much of the drop is due to lease expirations.

"Clearly, the Garden State is not over the soft period for office leasing activity. However, there is increased optimism about near-term economic improvement that should once again help to restart tenant demand in the state," Martin added.
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Article Details
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Publication:Real Estate Weekly
Geographic Code:1U2NJ
Date:Jul 30, 2003
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