Cities and suburban markets in the Mid-Atlantic show a commontrend. Generally, absorption is positive, vacancy rates aredeclining slowly and rents are steady or rising slightly. Largetransactions tend to be renewals or relocations within the localmarket.

While the trend is modestly positive from an overall economicstandpoint, modest is the operative word. Tenants are cautious,jobs drive activity and cost-effectiveness is a dominant theme.Class A space tends to report higher vacancy than class B space ineach market, with a desire to conserve funds and reduce occupancycosts.

Northern New Jersey reports the largest vacancy rate among themarkets we survey. At 14.9%, it's well above the equilibrium rateat the end of 2011 and slightly higher than the thirdquartervacancy rate. Average asking rents also declined. Prudential, oneof Newark's largest tenants, plans to remain in the market, butseeks to move from its long-term Gateway Center to a new tower itplans to build on Broad Street, just a half mile away. The cost ofkeeping Prudential in town is a reported $250-million tax creditawarded by the New Jersey Economic Development Authority, butownership of Gateway Center is reportedly suing Prudential over themove, seeking to avoid a long-term vacancy at the Center. And NewYork's loss was Northern New Jersey's gain when the DepositoryTrust and Clearing Corp. decided to relinquish most of its space at55 Water St.—once over a million square feet in Lower Manhattan—forabout 750,000 square feet across the Hudson in Jersey City.