"While today's market has taken an expected toll on the Northern/Central New Jersey office markets in the second quarter of 2009, there are still pockets of opportunity for tenants and investors to take advantage of, based on second quarter market fundamentals," stated Jeff Hipschman, senior managing director at CBRE. "With plenty of available office space on the market, coupled with lower asking prices and an increase in vacancy rates, tenants are in a position to negotiate with landlords, creating tremendous occupier opportunities. This was especially true in the Princeton, Parsippany, and 287/78 Interchange submarkets, where the largest amount of leasing activity was found. Overall, we believe that we are at the verge of seeing a strong turnaround in New Jersey's office market."
Market fundamentals in the Northern/Central New Jersey office market kept pace with national trends in the second quarter of 2009, with leasing velocity closing at 865,068-sq.-ft., which is a 196,265-sq.-ft. decrease from last quarter and a 920,000 sq. ft. drop from this time last year. The largest amount of activity was found in the Princeton (145,078-sq.-ft.), Parsippany (98,554-sq.-ft.), and the 287/78 Interchange (89,852-sq.-ft.) submarkets. The average deal size also continued to decline, down 10 percent from last quarter, with renewal activity driving the market, up 25 percent from last quarter.
With 1.5 million sq. ft. of space added to the market in the second quarter, availability rates rose to a record high in the second quarter of 2009, closing at 33.7 million sq. ft. or 21.5 percent, an all-time high since tracking began in 1990. Submarkets with the lowest availability rates included the Route 17 Corridor (8%), a decrease from the 8.8% in the first quarter; the Waterfront (12.1%) and Suburban Essex/Eastern Morris (14%). This increase in available space, coupled with reduced leasing velocity, drove down net absorption, which totaled a negative 1.6 million sq. ft. for the second quarter, a decrease of 353,247 million sq. ft. from the first quarter of 2009. New blocks of space contributed to this negative absorption rate, which included 142,500-sq.-ft. in Montvale, 86,254-sq.-ft. in Parsippany, and 87,650-sq.-ft. in Jersey City (Waterfront submarket).
"There is no denying that current market fundamentals in the New Jersey office market are replicating national recessionary trends, as asking rates continue to drop, availability rates increase and leasing activity trends downward at the close of the second quarter of 2009," noted Hipschman. "Despite these current market indicators, we believe that recovery is on the horizon for the New Jersey office market, as job losses stabilize and pricing for new listings remains 'negotiable,' creating opportunities for tenants and owners alike. We remain confident in the strength and overall vitality of this market as we continue into the third quarter of 2009."
Top transactions during the second quarter of 2009 included: Virgin Mobile's 90,396 sq.-ft. lease at 10 Independence Boulevard in Warren Township; Dey, LP's 53,517-sq.-ft. lease at 110 Allen Road in Bernards Township; Metavante Corporation's 51,000-sq.-ft. lease at 400 Plaza Drive in Secaucus; Blue Hill Data Service's 49,000-sq.-ft. lease at 2 Blue Hill Plaza in Pearl River and Global Aerospace, Inc.'s 47,891-sq.-ft. lease at 1 Sylvan Way, Building C in Parsippany.
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