EAST RUTHERFORD, NJ-”The overwhelming force impacting New Jersey is the sinking US business cycle.” That was the message delivered last night by economist James Hughes, dean of Rutgers University’s Edward J. Bloustein School of Planning and Public Policy, at Grubb & Ellis’ annual forecast event here Thursday night.

Noting that the average national post-war economic expansion typically lasts 57 months, and the current expansion has lasted 75 months, “a big-time consumer retrenchment is on the way in 2008,” Hughes said. The reasons: Weaker job markets, tightening credit and higher energy costs.

“Fasten your economic seat belts–it will be a bumpy ride ahead, especially in the first two quarters,” he said. “We’ll see about the second half of the year.”

For New Jersey in particular, it’s an economy that transformed itself from a fading industrial power to a technology-oriented power and became “the epicenter of growth in the Northeast from 1980 to 2000.” But while the state retains an underlying economic potency tied to knowledge-based jobs, “the problem is that employment in New Jersey has refused to grow at anywhere near the rate of past expansions,” Hughes said.

“The bottom line is that New Jersey has yet to have a break-out year in the new millennium,” he said, citing as major challenges, housing affordability, business costs and the perception of an unfriendly business climate.

In terms of real estate, “2007 was a case of the glass being either half-empty, or half-full,” said Stephen Jenco, director of client services in Grubb & Ellis’ Fairfield, NJ office. The half-full was the market in 2007 overall improved a bit over 2006. The half-empty was that the second half of 2007 “was a bumpy ride along a potholed road,” he said. “Limited leasing velocity was a recurring theme.”

For the office market, Jenco predicted a “flight to quality,” with class B tenants looking to upgrade to class A space because of competitive rents and free-rent packages. “Property upgrades provide an opportunity,” he said.

In the industrial market, meanwhile, the surge in demand for W/D space in 2006 was followed by a rise in speculative development and rising availability, “a speed bump in 2007. Industrial availability is at its highest level in two years, and new construction is the culprit.” And even with that rise in availability, Jenco predicted a new wave of development around the Port of Newark/Elizabeth.

Tim Feemster, SVP and national director of global logistics for Grubb & Ellis, told attendees that, “where a shipping container ends, either at a port or a final destination, is important, and water is the cheapest way to get it there. That’s why it’s important to real estate in the New York/New Jersey area,” he said. “For all-water transportation and logistics, the New York/New Jersey area is in a great position.”

The event also gave Scott Peters, president and CEO of the “new” Grubb & Ellis following its merger with NNN Realty Advisors, a chance to offer his take on that merger to the New Jersey audience.

“Any merger must be for the benefit of the ultimate user–in this case the client,” Peters said. “Clients want to get the best service. NNN was the number one or two client for Grubb & Ellis in the years leading up to the merger.

“This merger puts Grubb & Ellis on a financial footing that it’s never been on before,” Peters said. “Both companies have five-year plans, and the merger accelerated both plans. There was very little overlap between the two companies, and this is going to be a tremendous relationship.”