C&W Report: 9/11, National Trends Have Made Their Mark

"Although the diversity of industries based here helped us stay ahead of other national markets, leasing slowed throughout the state in the third quarter," according to Donald P. Eisen, executive managing director. "The exception, of course, occurred in the last two weeks of September, when a flurry of activity resulted from Manhattan-based companies that needed immediate solutions to regroup.

"And while some displaced companies filled vacant space along New Jersey's Hudson waterfront," Eisen continues, "many found opportunities to remain in New York. At the same time, a great deal of 'shadow space' was added to the market, especially large blocks of corporate-held space."

C&W estimates putt that "shadow space" at more than 993,200 sf in the month of September alone. The firm counts 93 blocks of space in 74 buildings across the northern and central portions of the Garden State.At the same time, the C&W report places the overall vacancy rate at 11.7% for the region at the end of the third quarter, up from 10.5% at mid-year. Central New Jersey accounted for most of that - its vacancy rate jumped from 8.5% to just under 13%. In contrast, Northern New Jersey saw a minimal increase from 11.9% to an even 12%.

"We expect the cycle to continue downward, with less demand in most sectors," Eisen predicts. "The exception, of course, is the pharmaceutical/life sciences sector, which continues to actively expand in the state.

"We also anticipate a second wave of tri-state suburban leasing as companies rethink their long-term real estate strategies," he continues. "Countering the recent trend toward consolidation, businesses will likely consider the importance of back-up operations. We don't foresee an exodus from Manhattan, but we do project increased complementary suburban offices."

Another prediction: More companies looking for space for data center operations. "Clearly, the companies that regrouped the fastest following the World Trade Center collapse were those with the best data recovery operations," Eisen concludes. "This has increased the awareness and importance of the need for off-site, back-up data center or third-party disaster recovery facilities."