In the face of economic weakness, many tenants in New Jersey are mystified by the rigidity and sudden swing of the office and industrial markets. When it comes time to renegotiate the lease, tenants are quite surprised to learn that rents in many markets across New Jersey are going up, and at a dramatic pace that we have not seen in decades. Businesses are seeing their profits getting squeezed ever tighter at the same time their operating budgets are spiking. How can this be, you ask?
The office and industrial space markets march to the beat of a different drummer. These markets are subject to the laws of supply and demand and as we have pointed out previously there has not been any significant construction of new office properties in decades. As we have been further noting, our State’s largest Landlord Mack-Cali Realty Corp. has been selling the weaker links in its vast portfolio of properties and has been repurposing some of them to residential.
The office markets across New Jersey are bifurcated where some areas like Metro Park are near full occupancy and others like Parsippany are still considered weak but recovering. Historically, office tenants have been rather spoiled in New Jersey, experiencing flat rental rates for many years. Now, for the first time in decades, Landlords in some markets seeing full occupancy are demanding rent increases to “market” rates.
So, what should tenants be doing? My advice for tenants is to look at your real estate needs earlier, so that you have the time to develop options. Just because market rates are going up, does not mean that tenants should simply roll over and play dead.
This is the time when a real estate advisor can make a huge difference as working with a tenant rep can make the renewal or relocation process a more stress-free experience. Knowledge is power and leverage is all about knowing what is achievable. The key to success is having an advisor leading the negotiations who has the depth of experience to motivate the Landlord to compete.
So, for the New Year, we invite your inquiries and welcome you to visit us at Dickstein Real Estate Services where “OUR DIFFERENCE IS YOUR ADVANTAGE®”.