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ORADELL, NJ-Weichert Commercial Brokerage Inc. has been appointed exclusive leasing agent for 19,662 square feet of office and medical space located at 550 Kinderkamack Rd. here. Senior vice president Ron Mahr, SIOR, and vice president Jim Tsonas will be handling the leasing of this property.

The one-story, brick colonial with slate roofing is located off the Garden State Parkway at Exit 165. The property currently has 13,662 square feet of office space–divisible to units of 2,000 square feet and larger–and 6,000 square feet of medical space–divisible to units of 1,000 square feet and up–available for lease.

Rental rates are in the $20 range, but the owner, who did not want to be named, is offering two months free rent now through Dec. 31, and half off the first year’s rent to any tenant that signs a lease for at least five years. This move comes as very little surprise as more owners of office and industrial properties are going to great lengths to keep their buildings occupied; using an assortment of concessions–from bountiful tenant improvement dollars to longer free-rent periods as well as reduced rent–to induce tenants to their buildings and keep the ones they already have.

Earlier this year, the Sudler Cos. began to market its 500,000-square-foot office building in Cranbury for the astonishing price of $4.95 a square foot. No deal has yet been struck to fill the vacant class A asset, but Steven Spinweber, Sudler’s executive vice president of real estate, has no regrets about marketing the Princeton-area property for such a low rental rate. In more normal times, the building could command rents between $18 and $22 a square foot. “You have to be aggressive to lease a building of that size,” he says.

During the typically slower summer months, roughly five prospective tenants did tour the building and Sudler hopes to sign some deals this fall. “It’s taken a while to get the building the exposure it needs,” Spinweber says, “but we are encouraged by the amount of activity it has had.”

A recent study by Studley found that the value of concession packages offered by New Jersey class A office landlords skyrocketed by 42.9% to $50 last year from $35 in 2007. Among the findings in the Studley Effective Rent Index 2009 New Jersey report was a 20% drop in landlord effective rent, which is an estimate of rent received from a tenant, less related expenses, to $10.05 a square foot. Total rent rose a modest 1% to $33, but net rent fell 1.4% to $19.80.

Between 2007 and 2008, operating expenses increased 5.1% to $8.32 a foot, while real estate taxes jumped 6.9% to $3.25 and electrical costs went up by 0.6% to $1.63. During the same period, tenant effective rent declined by 6.8% to $25.60. Tenant effective rent estimates the actual occupancy cost for the tenant by calculating the total rent minus lease concessions, which are amortized over a 10-year period, using a 10% interest rate and beginning-of-period payments.

“If there’s a tenant in the market, landlords are doing everything in their power to get a look at the deal,” says Jamie Drummond, managing director at FirstService Williams, based in Parsippany.

However, each transaction is unique based on a number of variables from the tenant’s credit worthiness and the amount of tenant improvements required to lease term and the size of the transaction. The financial stability of the landlord and current vacancy rates also factor into the landlord’s response.

“Depending on the size of the tenant and the term, landlords who have debt-free buildings are more willing to give one year or more of free rent,” says Morristown-based Robert Donnelly, vice chairman of Cushman & Wakefield. “Landlords in turn will try to get the new tenant to take over the obligation of a previous short-term lease, if one exists, and move the free rent to the end of the term.”

But there are instances cropping up where tenant demands are verging on the unrealistic. “Many landlords have certain financial criteria and they’re doing what they can,” Drummond says, “but at some point a deal just doesn’t make sense.”

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