Slow Job Growth Remains Concern for Office Sector

NEWARK-New Jersey’s economy is growing, but it lags the US and job growth could amount to just 1% this year. That was the message delivered by Rae D. Rosen, senior economist and assistant VP of the Federal Reserve Bank of New York at a real estate market forecast meeting of the Regional Business Partnership here yesterday. On top of that, most of the growth that is occurring involves lower-end service jobs, while more high-end jobs are moving out of state.

The problem for real estate, explained Thomas V. Giannone senior director at Cushman & Wakefield of NJ, East Rutherford, is that the overall office vacancy rate in Northern and Central New Jersey is 20%. With growth in high-end office jobs lagging, it’s going to be tough to bring that number down.

On the one hand, “office leasing activity has picked up by 30%, which is great news, and there were several very large transactions last year,” Giannone told the group. “The problem is that some of the largest transactions were tenant movement and not tenant expansion, so the activity doesn’t translate into net absorption. Net absorption was actually down a little.”