Declining vacancy rates bode well for the state

Real Estate Weekly, July 27, 2005

According to a recently released second quarter market report by GVA Williams New Jersey, the northern and central New Jersey office market continues to experience positive conditions. Overall, vacancy rates decreased to 17.36% from 17.97% in the first quarter. In total, vacancy rates have decreased for the third consecutive quarter--reaching their lowest level since the second quarter of 2001.

In addition, six out of the 10 counties surveyed have experienced a continued decline in vacancy, according to GVA Williams.

"New Jersey's commercial real estate market is on a definite rebound with large blocks of space steadily coming off the market and sublease space slowly being absorbed," said Matthew J. Dolly, director of research and marketing with GVA Williams New Jersey. "Velocity has been strong all year. There is a feeling of cautious optimism based on consistently improving market conditions."

According to GVA numbers, the northern New Jersey office market vacancy rates declined from 16.53% to 16.18% since the second quarter of 2004.

In central New Jersey, the vacancy rate also decreased--from 21.73% to 19.1% over the course of a year. Sublease space is also diminishing, with its vacancy declining from 20% to only 16.2%.

Rental rates increased since the second quarter of 2004, with overall average asking rents rising from $23.68 to $24.18. Since the first quarter of 2005, rental rates have increased in northern New Jersey from $24.04 to $24.39, but have decreased in central New Jersey, dropping slightly from $23.91 to $23.84.

"Although the numbers point to stronger third and fourth quarters, there is a concern that if the unemployment rate is only 3.9% while 17.4% of office space remains vacant, where will the jobs come from that will fill office space and drop the vacancy rate down to a comfort level of 10-12%? With an extremely well-educated workforce and an Economic Development Authority that offers many incentive packages which have already lured several tenants from both outside the state as well as internal expansion, New Jersey's economy has more than enough resources to provide the growth needed to help absorb office space," noted Dolly.