Office Market Continues to Stumble

In the Northern New Jersey office market, for example, another 900,000 sf of sublet space entering the market helped drive the overall vacancy rate from 12.8% to 13.8%, according to C&W. Direct vacancies remained stable, rising a mere 1/10th of a point to 9% since the end of last year. Altogether, some 35% of the total space to be had is of the sublet variety, compared to 26% a year ago, and a historical range of 10-20%. Leasing activity was up a bit over last year's fourth quarter, but still low compared to earlier quarters. And some 72% of the 1.6 million sf of office leasing came in class A properties.

In the central part of the state, meanwhile, the numbers were a bit more radical, with the overall vacancy rate for offices jumping from 15.7% to 17.8% since the end of 2001. Direct vacancies were up from 8.8% to 10.1%, with at least half of that increase attributable to newly constructed space coming on the market, according to C&W.

By way of analysis, a whopping 43% the total amount of office space available was of the sublet variety in Central New Jersey. In reality, that direct vacancy rate of just over 10% still constitutes a tight market, and few owners are particularly worried because someone is still paying rent for all of that sublet space. Leasing activity, however, was way down for the quarter: Just under 545,800 sf was leased, compared to 2.1 million sf in the first quarter of 2001.

The combined industrial market for Northern and Central New Jersey remains the star performer in the region and, arguably, nationally. The vacancy rate did inch up a bit, from 5.9% to 6.3%, according to Cushman & Wakefield's preliminary figures for the quarter. That's still not an awful lot of space available in a market that totals nearly 700 million sf, and average asking rents held firm at an average of $6.67 per sf.

Much of the new industrial construction in the region is centered in Middlesex County, particularly along the New Jersey Turnpike, where build-to-suit mega-projects for companies like Volkswagen and Pearson Educational continue to rise. Leasing activity remained solid, and even grew substantially. A total of 3.7 million sf of industrial space was leased in the market in the first quarter, rising from 3.1 million sf in the first quarter of 2001, according to C&W.