"Fueled by a tightening Lower Manhattan market, the waterfrontremains one of the state's strongest markets," says Philip Lipper,corporate managing director in Studley's Central New Jersey officehere. "A strong Dow bodes well for the waterfront because a strongWall Street also makes for a strong Hudson Street in Jersey City, akey office address within the submarket."

On the development side, activity doesn't necessarily reflectdemand, according to Studley. One example is the Princetonsubmarket, which has historically been overbuilt and currently has10 buildings under construction despite a high 16% class Aavailability rate. On the flip side, the Hudson waterfront has amillion sf on the boards but little under construction despite a13.7% availability.

"Those projects will not break ground until a major tenantcommits to leasing," Lipper says. And in a macro sense, "New Jerseyis locked in the throes of a problematic economy," he says. "Nowmore than ever, New Jersey's office submarkets are linked to theprosperity of the New York economy. To emerge as an independentlyviable economy, the government must implement measures todramatically improve the business-friendliness of the state's taxstructure."