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ISELIN, NJ-The dance between landlords and tenants shifted during the first quarter, with tenants opting to renew or restructure their leases well in advance of their lease expirations, according to Studley’s Q1 Northern and Central New Jersey office report. The study found little change in availability rates, with the state’s overall rate standing at 18.9%, down 0.4% from the previous quarter but up by 1% from the same time last year. Meanwhile, the class A availability rate–19.4%–posted a drop of 0.6% for the quarter but a gain of 1% for the year.

“Basically, in New Jersey what’s happened is that people are playing musical chairs. Some people grow, some shrink and some move,” Colliers Houston & Co. president David Houston tells GlobeSt.com, adding that the market has been flat for 18 years and counting.

Part of the problem, according to Jim W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy, is that the state hasn’t created one net new private sector job since 2001. “All of our job growth has been in the government, which is why our taxes are terrible,” Houston adds. “Unless you get a substantial increase in private sector jobs, you’re not going to work down this inventory.”

Although Trenton has created incentive programs for which few businesses can actually qualify, such as the Urban Transit Hub Credit program–which requires a $50-million capital investment–the old faithfuls, like the Business Employment Incentive Program and Business Retention and Relocation Assistance Act Grant, continue to be the easiest incentives to utilize, according to the Studley report. The BEIP program, in particular, can effectively reduce net rent by close to $10 to $12 per foot,

Also signed into law this year was the Licensed Site Professional bill, which passed in the Assembly by a vote of 75-2, with two abstentions, and in the Senate by a vote of 34-4.

The legislation permits owners and developers of contaminated sites to hire private consultants to certify that their sites are clean following remediation. Supported by the business community, companion bills A-2962 and S1897 are aimed at moving projects forward by assisting the understaffed New Jersey Department of Environmental Protection on the certification end. The most serious cases of contamination are still under the direct oversight of the DEP, but a 13-member licensing board certifies qualified professional consultants to oversee the other sites.

“This is a step forward in that public and private parties are working together to address environmental concerns,” says James A. Kosch, a veteran environmental attorney in LeClairRyan’s Newark-based Tort Defense Group. “It makes no sense to the state, its citizens, or businesses to have 20,000 unremediated sites.”

The New Jersey legislation is based on a program already in place in Massachusetts and, to a lesser extent, in Connecticut. The bill’s sponsors drafted the New Jersey legislation primarily based on the Massachusetts model. “This legislation is consistent with the way other licensed professionals are dealt with, and is a rational way of moving the clean-up approval process forward on the sites that state government does not have the capacity to handle,” adds Kosch, who is also a director of the New Jersey State Bar Association’s environmental law section.

Still, not everyone’s happy with the dealings in Trenton. “The LSP bill passed in mid-March, but it sat on the Governor’s desk until May before he signed it,” says Houston. “What was he waiting for? It was veto proof.” He paints a similar picture of the Permit Extension Act, which “the Governor had 45 days to sign and opted to wait until the 44th day.”

The state also developed an ‘Invest NJ’ program, which created more than 16,000 new jobs before running out of funds, says Houston, “but Gov. Corzine is not putting more money into the program. That’s downright criminal. Here’s a program that works. Why not double down?”

It’s not all bad news in Trenton, though. Jerry Zaro, Corzine’s economic czar, gets it, Houston says, as does the legislature led by Democrat Ray Lesniak. “Jerry is certainly a major improvement over his predecessor Gary Rose, who once told me that the key to successfully building the New Jersey economy was staggered shifts. When I asked him what that was, he said: ‘when we have staggered shifts then more people can work in the same space.’”

We don’t yet know the outcome of the Federal government’s stimulus package or of the state’s various legislations that seek to offer incentives to businesses, Studley vice chairman George J. Martin tells GlobeSt.com, but what we do know is that there needs to be more oversight on the state’s spending, especially in light of Gov. Corzine’s proposed budget that includes $916 million in new and increased taxes.

The good news for New Jersey office tenants, however, is that now is an excellent time to negotiate more advantageous real estate deals, well before lease expiration, and to take advantage of opportunities to craft creative leases and debt structures that help make real estate work for tenants and their businesses.

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