"Some submarket are experiencing a statistical increase inrental rates due to availability of higher-end product rather thanas a result of a true increase in asking rents," says PhilipLipper, corporate managing director in Studley Central New Jerseyoffice here. "The only exception would be the Hudson Waterfront,where landlords continue to benefit from tenants fleeing atightening Lower Manhattan market."

The Princeton market, meanwhile, where spec development isproviding a variety of options, serves to underscore the preleasingchallenge facing landlords, the report says. In Princeton, ahalf-dozen spec buildings, all more than 100,000 sf, are underconstruction, and only one of them has had any significantpreleasing activity. And that one, the 140,000-sf building at 902Carnegie Center, is only 6.7% preleased with a Q2 completionlooming.

Also, availability in the market rose from 16.5% to 18.7%year-to-year as of the end of 2006. Average asking rents came in at$25.34 at year-end 2006, a 2.4% increase from a year earlier. Andoverall Q4 leasing activity was down 57% from a year earlier.