SADDLE BROOK--According to the findings of CB Richard Ellis' First Quarter 2008 Office MarketView, the northern/central New Jersey office market experienced a significant decline in leasing activity compared to previous quarters.
However, while the availability rate and net absorption dived into negative territory, the first quarter of 2008 closed with an increase in Class A asking rents and sublet rents.
While research does not yet reflect the New York City tenant spillover to New Jersey, there are several New York City tenants inquiring about availability in the state's suburban markets. The Hudson Waterfront submarket remains a viable alternative for some of the New York City firms looking for a cost-effective alternative, but supply has tightened dramatically, with few large blocks of space currently available.
Uncertainty in the economy and on Wall Street has also affected the commercial real estate market, leaving tenants hesitant to commit to additional space. Tenants have become increasingly cautious in making decisions, which is evident in the lack of leasing velocity in the marketplace. The undetermined mood of the economy over the next few quarters will affect tenants' choices to renew their current leases or relocate. Three of the top five transactions during the first quarter were renewals or renewal/expansions.
Average asking rents were on a slight downturn first quarter, totaling $25.60 per square foot, and decreasing four cents from the first quarter 2007. Sublet prices actually increased by 36 cents from last quarter, while direct rents dropped by 12 cents from fourth quarter 2007. The submarkets posting the highest average asking rents for first quarter of 2008 were Chatham/Millburn/Short Hills ($42.94 per square foot), the Hudson Waterfront ($31.56 per square foot), and the Palisades ($28.79 per square foot).
CB Richard Ellis
www.cbre.com
A continual trend in the market is the push towards more green building initiatives in New Jersey. Owners have realized that energy efficiency is a top priority for many corporations, and as a result, more are contemplating LEED certification. A growing number of tenants have a corporate mandate for occupying LEED-certified space in the future.
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