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JERSEY CITY, NJ-The Q1 numbers are in, and while they aren’t great, they still don’t show an office market in serious distress. That’s the overview provided by the latest data from several New Jersey market researchers. They also show that this city’s submarket is one of the standouts.

“Northern New Jersey leasing activity registered more than 1.6 million sf this quarter,” says Gil Medina, executive managing director at Cushman & Wakefield, East Rutherford. “This indicates that despite the declining economy and slower pace of activity, some companies appear to be less apprehensive than others in terms of making space commitments.”

Overall, though, vacancies are up a bit. C&W’s numbers show a North Jersey vacancy rate of 16%, up 0.3% from the end of 2007, and Central Jersey vacancies up 2.2 points to 20.3%, although much of that is attributable to Lucent’s departure from 101 Crawfords Rd. in Holmdel. Figures from GVA Williams NJ, Parsippany, meanwhile, show a combined North/Central office vacancy at the end of Q1 at 17.8%, up from 17.6% last quarter but down from more than 17.9% a year ago.

“Uncertainty for New Jersey’s future business climate has caused an increase in tenants remaining in their current spaces and seeking shorter-term leases,” says Matt Dolly, GVA Williams NJ’s director of research. “As a result, office leasing velocity has considerably slowed during Q1. With tenants staying put, occupancy in landlords’ portfolios has increased, and with a lack of new construction, rents have actually started to rise.”

Dolly’s statistics have statewide North/Central average asking rents at $24.52 per sf, up from $24.30 in Q1 2007 and $24.49 in Q4 2007. C&W’s research puts North Jersey average asking rents at $27.17 and Central Jersey’s at $25.11, with both regions showing “slight fluctuation.”

But the occupancy cost picture, if not actual rents, could be changing. A new report from Studley indicates that landlord concession packages are 16.7% higher than a year ago, coming in at an average of $35 per sf at the end of 2007 compared to $30 per sf at the end of 2006. And tenant uncertainty will likely remain elevated as the economy falters.

“In a softening market, landlords typically prefer to increase concessions rather than to lower face rents,” says George Martin, vice chairman in Studley’s Iselin office. “These concessions can drive effective rents down, creating more attractive opportunities for tenants.”

Studley senior managing director Philip Lipper says that “the state still hasn’t seen significant net positive absorption, as the majority of lease transactions are a result of renewals and businesses playing musical chairs. We can expect to see little increased activity in the coming year, but there will be additional opportunities for tenants to lower their expenses.”

Dolly specifically points to Jersey City’s waterfront market, along with Princeton and Parsippany as the strongest submarket. The largest office lease so far this year, in fact, was AXA Financial’s 245,000-sf deal at Brookfield Properties’ Newport Tower here in February. AXA Equitable then turned around and quickly took 100,000 sf at Hartz Mountain’s 500 Plaza Dr. in Secaucus earlier this month. And in Central Jersey, Danish pharmaceutical giant Novo Nordisk, in recent days, leased the entire 167,000-sf building at 1100 Campus Dr., a Patrinely-owned building in Plainsboro.

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