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NJ office market sees changing dynamics.

Although the amount of available space in the New Jersey commercial real estate market is holding at about 25 million square feet or 19.27 percent, the marketplace itself is changing, according to the latest edition of the New Jersey Gordon Office Market Report, published by Edward S. Gordon Company of New Jersey.

"Statewide, the trend toward positive absorption of Class 'A' space at the expense of 'B' quality buildings continues," explained Executive Director Thomas V. Bermingham. "Blocks of 100,000 square feet or more in the Class 'A' category are disappearing as the glut of Class 'B' and 'C' buildings grows." In the past 12 months, 1.1 million of positive net absorption of 'A' space was offset by 1.7 million square feet of Class 'B' space coming back onto the market.

The Winter 1992 edition of the Gordon Report shows that seven of the state's 21 market segments have no large blocks of 'A' space available and another six have just one such block each. "However, prices for this space, which range between 20 percent and 50 percent below the rents of the late 1980's, are not rising," Bermingham explained citing such reasons as the huge oversupply of 'B' space which could be renovated and cross-price elasticity of 'A' space between submarkets. "Users will consider a number of markets to get 'A' product at costs they consider reasonable," the real estate executive said.

The state's landlords, who are now well aware of the expense and risks involved in attracting new tenants, have instituted aggressive tenant retention programs. At the same time, owners of newly completed buildings find that it takes longer to lease space than they expected. This is added to decreasing rents and the need to offer hefty concession packages, according to Mr. Bermingham. The Gordon Report shows Routes 287/78, Chatham/Millburn/Short Hills and Princeton as the state's tightest markets with 6.84 percent, 12.56 percent and 11.84 percent availability rates, respectively. The softest markets are the Route 17 Corridor at 40.35 percent, the Waterfront at 29.64 percent, Central Bergen at 28.18 percent, Parsippany at 27.16 percent and the Meadowlands at 26.21 percent.

Newly completed construction in New Jersey totaled just 1.2 million square feet in 1992, according to the Gordon Report. This compares to an average addition to the market of 8.6 million square feet annually during the peak years of 1982 through 1988.
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Title Annotation:New Jersey Gordon Office Market Report published by Edward S. Gordon Company Inc. reports on trends in office rental market in New Jersey
Publication:Real Estate Weekly
Date:Jan 20, 1993
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