NJ Office Tenants Find a Sliver of Hope Amidst a Troubled Economy
By Mel Fabrikant Thursday, February 05, 2009, 06:33 PM EST
Greater Landlord Flexibility and Government Incentives Create Opportunities, According to the Fourth Quarter 2008 Studley Report
Office tenants in Northern and Central New Jersey found a sliver of hope during the fourth quarter of 2008 as the real estate market continued to turn in favor of tenants with greater flexibility on the part of landlords, and additional and enhanced federal and state legislation was passed.
The Main Street Assistance Program and the Urban Enterprise Zone Enhancement Act, two state-backed programs passed in the fourth quarter, and The Urban Transit Hub Tax Credit Program, an existing incentive program, are three state-backed efforts to revive New Jersey’s business climate and economy, according to the Studley Report, an office market and space data report published by international commercial real estate services firm Studley.
“Though New Jersey has seen little fluctuation in its commercial real estate market over the years, the environment of late has moved in favor of tenants,” shared Studley Vice Chairman George Martin. “In addition to programs that are expected to create opportunities for New Jersey businesses, landlords have been more flexible in their lease negotiations, offering aggressive concession packages and lower rents to drive today’s slow leasing velocity.”
As of mid-December, the report cited that overall leasing totaled 1.0 million square feet, a significant decline from 49.2 and 69.6 percent from the previous quarter and year, respectively. On a trailing four-quarter basis, activity dropped by 24.4 percent from last quarter and by 45.8 percent from third quarter 2007.
“Many businesses halted their expansion or consolidation plans during the fourth quarter. However, for businesses that continue to grow, even modestly, or see growth in the near- and/or long-term, there are leasing opportunities that we haven’t seen in years,” said Studley Senior Managing Director Philip Lipper. Landlords are being especially aggressive to retain their tenants to avoid having to release any space into this environment, Lipper added.
Additional highlights from the Fourth Quarter 2008 Studley Report include:
· Overall asking rent was $27.24, a nominal decline of 0.6 percent over last quarter. Class A asking rent decreased by 0.3 percent to $28.11. Both overall asking rent and Class A asking rent marked a slight increase from one year ago, however, these numbers don’t represent the actual taking rent.
· Overall availability increased by 0.3 pp and 1.9 pp from the previous quarter and year-ago period to 19.3 percent. Class A availability, at 20.0 percent, posted gains of 0.3 pp and 2.0 pp for the quarter and year.
Capitalizing on the opportunity to lock in favorable lease terms, Standard Charter Bank moved most of its back-office operation, more than 300 jobs, from Lower Manhattan to 2 Gateway Plaza in Newark, during the fourth quarter.
Some pharmaceutical companies took advantage of opportunities in the marketplace. Novartis leased 219,999 square feet of office space at 180 Park Avenue in Florham Park in the Morris County submarket. In Somerset, in the Middlesex submarket, inVentiv Health leased 154,035 square feet of office space at 500 Atrium Drive, and Meda Pharmaceuticals leased 80,196 square feet at 265 Davidson Avenue. Also in the Middlesex submarket, construction continued at MetroTop Plaza II following a nine-month hiatus.
“Overall, it was an interesting quarter,” added Martin. “While we can’t know for certain the long-term effects that these government initiatives will have on the state’s economy and its businesses, for some office tenants, there is a renewed sense of hope bolstered by legislation that has recently been passed and New Jersey Governor Corzine's political ties with the country’s new president.”
Full data tables and analysis are immediately available upon request.
About Studley. Studley is the only global tenant advisory firm with a pure tenant representative delivery platform. Founded in 1954, Studley pioneered this conflict-free business model. Today, with 19 offices nationwide and an international presence through its London office and AOS Studley throughout Europe, Studley provides strategic real estate consulting services to top-tier corporations, law firms, nonprofits, government agencies and institutions of higher education. Information about Studley is available at www.studley.com.
Office tenants in Northern and Central New Jersey found a sliver of hope during the fourth quarter of 2008 as the real estate market continued to turn in favor of tenants with greater flexibility on the part of landlords, and additional and enhanced federal and state legislation was passed.
The Main Street Assistance Program and the Urban Enterprise Zone Enhancement Act, two state-backed programs passed in the fourth quarter, and The Urban Transit Hub Tax Credit Program, an existing incentive program, are three state-backed efforts to revive New Jersey’s business climate and economy, according to the Studley Report, an office market and space data report published by international commercial real estate services firm Studley.
“Though New Jersey has seen little fluctuation in its commercial real estate market over the years, the environment of late has moved in favor of tenants,” shared Studley Vice Chairman George Martin. “In addition to programs that are expected to create opportunities for New Jersey businesses, landlords have been more flexible in their lease negotiations, offering aggressive concession packages and lower rents to drive today’s slow leasing velocity.”
As of mid-December, the report cited that overall leasing totaled 1.0 million square feet, a significant decline from 49.2 and 69.6 percent from the previous quarter and year, respectively. On a trailing four-quarter basis, activity dropped by 24.4 percent from last quarter and by 45.8 percent from third quarter 2007.
“Many businesses halted their expansion or consolidation plans during the fourth quarter. However, for businesses that continue to grow, even modestly, or see growth in the near- and/or long-term, there are leasing opportunities that we haven’t seen in years,” said Studley Senior Managing Director Philip Lipper. Landlords are being especially aggressive to retain their tenants to avoid having to release any space into this environment, Lipper added.
Additional highlights from the Fourth Quarter 2008 Studley Report include:
· Overall asking rent was $27.24, a nominal decline of 0.6 percent over last quarter. Class A asking rent decreased by 0.3 percent to $28.11. Both overall asking rent and Class A asking rent marked a slight increase from one year ago, however, these numbers don’t represent the actual taking rent.
· Overall availability increased by 0.3 pp and 1.9 pp from the previous quarter and year-ago period to 19.3 percent. Class A availability, at 20.0 percent, posted gains of 0.3 pp and 2.0 pp for the quarter and year.
Capitalizing on the opportunity to lock in favorable lease terms, Standard Charter Bank moved most of its back-office operation, more than 300 jobs, from Lower Manhattan to 2 Gateway Plaza in Newark, during the fourth quarter.
Some pharmaceutical companies took advantage of opportunities in the marketplace. Novartis leased 219,999 square feet of office space at 180 Park Avenue in Florham Park in the Morris County submarket. In Somerset, in the Middlesex submarket, inVentiv Health leased 154,035 square feet of office space at 500 Atrium Drive, and Meda Pharmaceuticals leased 80,196 square feet at 265 Davidson Avenue. Also in the Middlesex submarket, construction continued at MetroTop Plaza II following a nine-month hiatus.
“Overall, it was an interesting quarter,” added Martin. “While we can’t know for certain the long-term effects that these government initiatives will have on the state’s economy and its businesses, for some office tenants, there is a renewed sense of hope bolstered by legislation that has recently been passed and New Jersey Governor Corzine's political ties with the country’s new president.”
Full data tables and analysis are immediately available upon request.
About Studley. Studley is the only global tenant advisory firm with a pure tenant representative delivery platform. Founded in 1954, Studley pioneered this conflict-free business model. Today, with 19 offices nationwide and an international presence through its London office and AOS Studley throughout Europe, Studley provides strategic real estate consulting services to top-tier corporations, law firms, nonprofits, government agencies and institutions of higher education. Information about Studley is available at www.studley.com.
