Parsippany, NJ – April 23, 2009 – (RealEstateRama) — Although the New Jersey commercial real estate market showed signs in the first quarter of 2009 of being at or near bottom, a large inventory of shadow space has the potential to hit the market later this year, which would further increase availability rates and decrease asking rents, according to data released by FirstService Williams, formerly GVA Williams, in its first quarter 2009 market report. The overall New Jersey office availability rate increased only slightly year-over-year, while asking rents were essentially flat during that time.
There has also been a noticeable uptick in activity over the past 30 to 45 days, as an increasing number of tenants are going out early to market, either to assess conditions, engage landlords or search for new space.
“The fact that there has been more market activity of late provides some hope,” said Matt Dolly, managing director, research and marketing, FirstService Williams New Jersey. “We have a new President in office, a new government and bailout plan, and the stock market has shown some recent improvement. There is a lot to process, and the market is still trying to adjust. We’ll know more next quarter.”
The FirstService Williams report suggests there will be an increase in short-term early renewals and extensions, but if the market is at or near bottom, tenants may be increasingly motivated to seek out long-term deals. Since fourth quarter 2008, asking rents ticked down, the first time in recent memory that landlords have reduced their prices overall.
Other highlights in the New Jersey office market during the first quarter of 2009 include:
• The statewide availability rate was 21.44 percent, a year-over-year increase from 20.51 percent, and up from 21.24 percent in fourth quarter 2008. Year-over-year, availability in Northern New Jersey increased from 18.82 percent to 19.79 percent, while Central New Jersey availability increased from 23.00 percent to 23.85 percent. Meanwhile, since fourth quarter 2008, Northern New Jersey availability decreased from 19.94 percent to 19.79 percent, and increased in the central region from 23.13 percent to 23.86 percent.
• Overall asking rents were down just six cents year-over-year, at $24.46. But while asking rents in Northern New Jersey decreased during that time from $25.30 to $24.61, they increased in Central New Jersey from $23.53 to $24.27, and up from $24.04 since fourth quarter 2008. Asking rents in Northern New Jersey decreased since then from $25.38 to $24.61, while they decreased statewide during that time from $24.77 to $24.46.
• Sublease space decreased statewide year-over-year from 22.95 percent of the market’s total inventory in first quarter 2008 to 20.39 percent this quarter. It should be noted that two buildings in Central New Jersey totaling more than 900,000 sf had a significant positive statistical impact on the surprising increase in sublease inventory; the lease terms expired and the space was returned to the landlord.
• The medical and education sectors continue to grow in New Jersey, with office deals available for tenants looking to upgrade the quality of their space, although likely at a lateral size. In addition, there has been an uptick in activity in Bergen County, as well as in rail areas, such as MetroPark and Newark.
“Credit is also playing an important role in this market,” Dolly said. “Not only are landlords more willing to negotiate with strong-credit tenants, but tenants, probably more so than ever, are looking at the credit-strength of the landlords.”
Led by Matt Dolly, FirstService Williams’ team of in-house research professionals compiled this office market report. The firm is regarded as one of the most respected full-service brokerage, management and advisory firms in the commercial real estate industry.
About FirstService Williams
FirstService Williams (formerly GVA Williams) is the New York area hub of FirstService Commercial Real Estate. The company is a leading provider of specialized realty services, including leasing, property management, investment advisory services, development, construction management, mortgage brokerage, tenant representation and institutional management. With nearly 300 employees and offices in Manhattan, New Jersey and Connecticut, FirstService Williams advised on more than $3.4 billion in sale, lease and capital markets transactions during a 12-month period. The firm manages more than 16 million square feet of prime commercial property. For more information, please visit the FirstService Williams web site at www.fswre.com.
