New Jersey economy does better than average.

According to Newmark & Company, New Jersey's economy continued to perform well during the second quarter, as both local and national economic indicators improved. Year-to-date, 36,100 jobs have been created statewide, 9,500 in May alone.

In April, New Jersey surpassed the employment

However, despite New Jersey's impressive economic recovery, the office market has not improved at the same pace. Although the availability rate has decreased from the record-high of 21% in the second quarter of 2003 to 19.6% this quarter, the market's availability remains one of the highest in the tri-state area.

The New Jersey sublet market accounted for the 577,726 s/f of positive absorption in the office market during the second quarter (1.177 million s/f were removed from the sublet market and 599,663 s/f added to the direct market). During the past several quarters, several sublease blocks were returned to the owners and placed on the direct market. This contributed to the negative absorption of 1.34 million s/f in the direct market over the past year.

New Jersey's availability rate fell from 19.8% last quarter to 19.6% in the second quarter. While the sublet availability rate reached a three-year low of 4.3%, the direct market's availability rate reached a nine-year high of 15.3%. As of July 1, 2004, the sublet market accounted for only 21.8% of total space available, down from 30% a year ago. Weighted average asking rents increased in the second quarter from $22.56 per s/f to $22.92 per s/f.

The Northern New Jersey office market experienced 336,972 s/f of positive absorption in the second quarter. While 88,693 s/f were added to the direct market, 425,665 s/f were removed from the sublet market. The Northern New Jersey market's overall availability rate fell to 18% from 18.3% in the previous quarter. The sublet availability rate dropped from 4.4% to 4% in the second quarter; however, the direct availability rate reached a seven-year high as it climbed slightly from 13.9% to 14%. Weighted average asking rents increased from $22.97 per s/f in the first quarter to $23.45 per s/f in the second quarter.

The Central New Jersey office market posted a net absorption of 240,754 s/f in the second quarter. The direct market posted negative absorption for the third consecutive quarter as 510,970 s/f were placed on the market, while the sublet market saw a removal of 751,724 s/f in the second quarter. The availability trend in the Northern New Jersey market appears to mirror that of the Central New Jersey, as the direct availability rate reached an eight-year high, climbing from 16.5% in the first quarter to 17.2% in the second quarter, while the sublet availability rate hit a three-year low with the availability rate dipping to 4.7% from 5.6%. Weighted average asking rents shifted upwards from $22.05 per s/f to $22.28 per s/f.

Leasing activity in the second quarter increased, especially in the financial services sector. Financial firms have been re-examining their needs and considering new leases. Several major deals have closed within the financial services industry after months of inactivity. After Citistreet signed a large lease at the end of last quarter, several other firms followed its lead. Deutsche Bank renewed its lease for 90,000 s/f at Harborside Financial Center--Plaza 1 in Jersey City, Chase Manhattan Mortgage signed on for 144,000 s/f at 194 Wood Ave. South in Iselin and Investors Saving Bank leased 53,199 s/f at 101 JFK Parkway in Short Hills.

Investment activity in the New Jersey office market more than doubled in the second quarter, as 6.9 million s/f of office space was sold, compared to 3.4 million s/f last quarter. In the most significant sale of the period, Wells Real Estate purchased 180 Park Ave. in Florham Park, a two-building property consisting of 385,000 s/f, for $78.4 million or $2134 per s/f. Both buildings are fully leased by AT&T through 2013.