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With the markets in chaos, pink slips are appearing with alarming frequency on the desks of those in the financial services sector. With so many companies cutting back, will the office market begin to suffer? Most of our readers think so. Just shy of half (49%) of this week’s poll respondents believe that layoffs in the financial sector will destroy the office market. A third (29%) think it won’t have much impact. The remaining 22% are optimistic, believing that this will give other tenants opportunities to expand. David Stifelman, executive director of Cushman & Wakefield, thinks New Jersey will begin feeling the effects of the layoffs soon, but it might not be the disaster many predict. Here are his thoughts:

“Jersey City is primarily populated by financial services firms, and some space that was a division of Bank of America was put on the market. As experts in the field, we think that there are going to be more layoffs, which will translate to less need for space. Most of the time when companies lay off people, it’s not front office, it’s more back office, and Jersey City holds a lot of the back office for the financial services. So, it’s not going to be great, time will tell, but you have to look at it on a case-by-case basis. This will have an effect out in Western New Jersey, off the waterfront as well.

“I would say that our saving grace is that most of the people who occupy space on the waterfront are not paying rents anywhere near what you’d pay in Manhattan, so if you have to balance your portfolio, you may want to look into shedding some of that space in Manhattan.

“There probably will be a lot more subleasing, Most of the space in Jersey City that was taken by financial services companies were long-term leases, so you’re going to see long-term subleases available, which will obviously affect pricing of direct space. One good aspect is that that there hasn’t been much direct space available for the past few years. There’s a vacancy rate of about 8% for class A space right now in Jersey City, which we consider to be below equilibrium. Things are still pretty healthy here.

“It’s difficult to say whether or not other companies will take space that some of the financial companies give up. You just never know. If people have the opportunity to exit the expensive space in Manhattan and move to the more efficient and less costly space in New Jersey and it works, then they’re definitely going to do that. I can tell you that there’s a transaction going on right now that’s very similar to that. There’s been some juggling around for a company with space in Manhattan, and they have the opportunity to take some space in Jersey City, and that’s going to save them a ton of money. But, it all depends on the company.”

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