Sowa, whose Plymouth Meeting, PA-based company has its New Jersey offices in Mount Laurel, believes that the market's slowdown has actually helped in terms of tenant retention. "We've noted 80% retention in the past year," he says. "Moving can disrupt a company, even if it gets a somewhat better deal. In some cases, I've seen tenants trading for shorter terms, but for the most part they're staying put."
Sowa also hasn't seen the amount of sublet space that has burdened the northern half of the Garden State. "Good supply and stable demand characterize this market," he explains. "There aren't a lot of highs and lows. We don't generally see spikes in the rental market, and that's not a bad thing."
As far as how much office space costs these days, Sowa says he hasn't seen much rent compression. He reports class A rents averaging in the $23 - $25 per sf range, plus electric.
What's driving the market? "Lockheed Martin for one," Sowa says. "Their star has risen, unfortunately because of 9/11. Cendant Mortgage is another significant presence. Those are two companies that have continued to expand despite the downward trend of the economy."
As for the future--at least for the next 3-6 months, "The fundamentals seem to be improving," Sowa says. "We're coming out of the trough, which wasn't as deep to begin with in this region. The market is slowly returning to normal. We've been trending away from bad real estate development, namely over-development. The projects we're seeing are characterized by public ownership or institutional partnerships, and good capitalization. The significance of what we 'celebrate' is one indicator of the healthier approach being taken toward development. We used to celebrate the financing of a project. Now we celebrate the leasing of a project."
Any wild cards? "A severe interest rate spike could affect tenants like Cendant Mortgage," Sowa concludes. "The good news for the South Jersey office market is the diversity of its tenants. That should help maintain stability."
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