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PARSIPPANY, NJ-Overall availability increased from 20.51% in first quarter 2008 to 21.44% in Q1 2009, according to new stats from FirstService Williams’ New Jersey office. Meanwhile, the average asking rent decreased from $24.52 to $24.46 during that same time period. Surprisingly, sublease now represents 20.39% of total available space, decreasing from 22.95%.

According to Matt Dolly, FSW’s New Jersey-based managing director of research and marketing, the market is still in “wait-and-see” period until it is clear which direction the economy is going. He tells GlobeSt.com that we’ve yet to see the bulk of expected new sublease space. “While we are seeing pockets of shadow space, there haven’t been a lot of reductions in space just yet, but it seems imminent.”

While there is a perception by tenants that the market will continue to struggle in the near term, Dolly says that there has been a noticeable uptick in activity in the last 30 to 45 days. “More tenants in the market are going out early, but this may result in two to three year early renewals/extension,” he says. Many tenants are reducing the term on their deals and looking for better deals on renewals, with “blends and extends” also becoming more prevalent.

According to its research, FSW is also beginning to see slightly longer term leases in some areas. “Those who choose to move can strike a very competitive deal because of the surplus of space,” Dolly says, adding that there is a flight to quality in some areas where tenants are willing to make a move. “In other areas,” he says, “tenants will stay in lower priced buildings, even where rents are lowered because they need to lower costs wherever they can.”

As for landlords, they’re feeling pressure and reaching for deals now, with many becoming more flexible and agreeing on one to two year deals for good credit tenants. “Asking rents are being lowered in areas of the state, with some landlords listing rents as negotiable and then lowering rates at the table,” Dolly says. The credit worthiness of landlords will continue to be critical in 2009.

Some bright spots include the medical and education sectors, which continue to show growth. Interestingly enough, Dolly says, there appears to be more office leasing activity in the Bergen County market. New Jersey is also making a large push to actively recruit cost-conscious companies from New York.

Overall, Dolly notes that the numbers were essentially flat for the quarter. “We haven’t really seen the fallout yet,” he says. “Garden State unemployment figures are around 8.2%, but there’s a nine to 12 month lag when it comes to the vacancy and availability rate. Our market is reactionary,” he adds. Dolly predicts that numbers will be flat for the next two quarters and will begin to show movement in fourth quarter 2009 at the earliest.

Other findings include:

Annual Trends: 1Q2008 to 1Q2009Availability Rates:

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