C&W: Cautiously Optimistic About 2003

"We are cautiously optimistic that the New Jersey economy has flattened out and will begin to see a slow rebirth in 2003," says Christopher Kinum, C&W's senior managing director and branch manager here. "But until then, real estate in New Jersey will mirror what has taken place during the past year."

Looking at the past year, the numbers are kind of grim, especially on the office side. According to C&W, the vacancy rate in Northern and Central NJ's nearly 169 million-sf office market jumped to 17.1% in North Jersey and 21.7% in Central Jersey at year's end. Those figures are up by 4.3% and 6% respectively from the end of 2001.

"Sublease space continues to weigh heavily on the market, representing 36% of all availability," Kinum says. "As these lease terms begin to end in the next year or so, landlords will be impacted by the shift to direct availabilities without the support of rental income."

Overall, leasing activity last year was 8.9 million sf, just over half of what it was in 2001, with law firms, public accounting practices and other service groups among the most active sectors. Year-to-date absorption was slightly positive, owing to the lack of new spec construction, according to C&W And while direct average asking rents remained flat at $30.29 per sf, "taking rents are 10 to 25% lower in most submarkets," according to Kinum.

On the industrial side, the region's 743 million-sf market saw about 22.4 million sf of activity, a number that's relatively stable compared to 2001. Most of that activity was in the warehouse/distribution sector, with both high-tech and manufacturing playing a supporting role.

At the same time, according to Kinum, the region-wide industrial vacancy rate of just over 6.5% is partially a reflection of the fact that just 2.4 million sf of new construction came on the market. Retail distribution, a mainstay of the market, remained flat last year, likely as a result of the weakened consumer confidence that plagued that sector.

"One of the major bright spots is that we're finally starting to see some real cooperation between the public and private sectors to grow our technology base," according to Kinum. "A commitment to life sciences and information technologies could be a major impetus for strengthening the state's economy and real estate."