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The New Jersey office market has seen moderate improvements in the fourth quarter of 2007, with positive net absorption and rent increases across multiple submarkets. Average asking rents increased in eleven submarkets raising the overall direct average asking rent to $25.69/s.f., from $25.37/s.f. a year ago. Along with rent growth, overall vacancy continued to decline in each of the last three quarters, dropping 0.78 percentage points from the first quarter and currently stands at 21.27 percent.
Based on October data, New Jersey’s unemployment rate rests at 4.1 percent, down from 4.3 percent in September and still below the national rate of 4.7 percent. The positive employment trend observed over the last five months continues through October as 1,400 jobs were added that month to the total nonfarm employment. The largest gains were seen in the professional and business services (+2,400) and education and health services (+1,000) sectors. However, declines in leisure and hospitality (-1,200) and trade, transportation and utilities (-1,200) sectors counteracted the preceding gains. Despite modest employment growth, the current office market conditions appear to have been reversed in many submarkets as a large amount of small Class B deals contributed to positive net absorption and lower vacancies. We anticipate this trend will continue throughout 2008 as businesses gain stability and possibly expand.
Leasing Activity
A number of large transactions have been completed this quarter:
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The Medicines Company signed a 15-year lease at 8 Sylvan Way in Parsippany, currently under renovation, for 176,000 s.f. The pharmaceutical firm will relocate and expand from its current location at 8 Campus Road in Parsippany.
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Lucent signed a 10-year new lease at 15 Vreeland in Florham Park for 67,000 s.f.
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Washington Group, an engineering firm, renewed and expanded by signing a four-year lease at 508 Carnegie Center in Princeton for 64,000 s.f.
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Comcast signed a five-year lease at 1100 Cornwall Road in South Brunswick for 60,000 s.f.
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KPMG renewed their lease at 530 Chestnut Ridge Road in Woodcliff Lake for 57,204 s.f., and will occupy the entire building.
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Carroll, McNulty & Kull, a legal firm, renewed and expanded its lease for 38,000 s.f. at 120 Mountain View Boulevard in Basking Ridge.
Building Sales
Building sales of note for the quarter:
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The two-property portfolio of 300 (land) & 301 (127,500 s.f., Class A) Carnegie Center Drive in Princeton was sold to Hilton Realty by Berwind Property Group. The buyer was bound by confidentiality agreements not to reveal the sale price of the building and the attached parcel.
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Princeton Commerce Center (70,985 s.f., Class B) at 29 Emmons Drive in Princeton was acquired by Oestreicher Properties from Commerce Center at Princeton LLC for $13 million ($183/s.f.) as part of a 1031 exhange.
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Waterview Business Center (208,601, Class A) at 10 Waterview Boulevard in Parsippany was purchased by McMorgan & Company from Teacher’s Insurance & Annuity (TIAA) for $37.5 million ($180/s.f.).
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1 Corporate Place South in Piscataway (90,000 s.f., Class B) was sold by Sudler Companies to MarLabs Inc. for $7.5 million ($84/s.f.). Marlabs plans to use the building as their U.S. Headquarters.
Buildings on the market include:
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270 Davidson Avenue, Somerset (228,240 s.f., Class A) owned by 270 Davidson LLC.
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Two buildings at 200 Cottontail Lane, Somerset (204,432 s.f., Class A) owned by Cottontail Investors LLC.
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265 Davidson Avenue, Somerset (178,244 s.f., Class A) owned by KBS Realty Advisors.
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200 Kimball Drive, Parsippany (175,000 s.f., Trophy) owned by Invesco.
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465 South Street, Morristown (140,581 s.f., Class A) owned by Massachusetts Mutual Life.
Construction Activity
The following three properties were delivered during this quarter:
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200 Princeton South Corporate Center, Ewing (160,657 s.f.)
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1249 South River Road, Cranbury (100,000 s.f.)
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22 Scotch Road, Ewing (30,000 s.f.)
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