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WOODBRIDGE, NJ-The 11 counties of Northern and Central New Jersey make up one of the largest real estate markets in the country -192 million sf of office space and 725 million sf of industrial space. And within that enormous block of landscape, “there has been a general slowdown, with substantially less velocity of leasing activity and an increase in vacancy, with about one-third of the space being sublet.”

The speaker is Stanley Simon, CEO of Newmark JGT of New Jersey, the firm that resulted from the merger earlier this year of Newmark & Co. and Jacobson, Goldfarb & Tanzman. “The market has been dichotomized into direct and sublet space,” Simon tells GlobeSt.com. “The majority of the sublet space is in Central New Jersey, which is home to a number of companies that have shed space to cut costs. For the most part, these companies are concentrated in the communication, financial and dot-com industries.”

In terms of numbers in the 11 counties tracked by Newmark JGT, the market had a negative absorption of almost 7.8 million sf at the end of the third quarter of last year. Overall asking offices rents had stabilized at $24 per sf gross, mostly because of the increase in sublet space in class A buildings. The overall available office space was just over 30.2 million sf, with 21.75 million being direct and the rest sublet.

“Essentially, landlords who are well positioned with money and low vacancies are still less flexible than the subletting tenant,” according to Simon. “Subleasing presents a number of options – terms can be short or long, and options may be assumable. The landlord may write a new lease if the tenant’s credit is good. Also, furniture, technology and tenant improvements may be in place, and occupancy can be immediate. Finally, most locations are in ‘A’ buildings.”

What about industrial space? “The market in New Jersey is continuing to out-perform other real estate sectors, with vacancy rates in Northern and Central New Jersey of 6.1% at the end of the third quarter,” he says. “That rate includes ‘flex’ space. In general, however, the market is pretty flat on a stabilized basis.”

As far as the economy, “We are in a recession, but I believe it will be mild and will turn around in 2003,” Simon concludes. “By that time, much of the sublease space will be absorbed, and in the meantime, there will be very little new construction unless it’s partly or wholly pre-leased.”

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