ISELIN, NJ-Office tenants in Northern and Central New Jersey are engaged in a game of “musical chairs.” That’s the conclusion of a new Q4 office market report issued by Studley Inc. Except in Jersey City and Newark, where large blocks of class A space are limited, the market has been essentially flat, lacking much movement either upward or downward in availability and rents. As a result, tenants “have been able to pursue advantageous renewals or attractive alternatives,” the report says.

“Some submarket are experiencing a statistical increase in rental rates due to availability of higher-end product rather than as a result of a true increase in asking rents,” says Philip Lipper, corporate managing director in Studley Central New Jersey office here. “The only exception would be the Hudson Waterfront, where landlords continue to benefit from tenants fleeing a tightening Lower Manhattan market.”

The Princeton market, meanwhile, where spec development is providing a variety of options, serves to underscore the preleasing challenge facing landlords, the report says. In Princeton, a half-dozen spec buildings, all more than 100,000 sf, are under construction, and only one of them has had any significant preleasing activity. And that one, the 140,000-sf building at 902 Carnegie Center, is only 6.7% preleased with a Q2 completion looming.

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. And overall Q4 leasing activity was down 57% from a year earlier.

“For the long-term prospects of the market to improve, Gov. Corzine and the legislature must reverse the current tax trend and make New Jersey more business-friendly,” Lipper says. “Only an improved economy can give the office market renewed vigor.”

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