Northern New Jersey retail and industrial markets steady: office markets still ‘years’ from full recovery – Commercial Sales & Leasing
William C. Hanson
The overall state of the commercial real estate market in Northern New Jersey continues to reflect improved conditions.
In particular, the industrial real estate sector is experiencing steady activity with big box companies looking to buy facilities and enter into build-to-suit agreements, while the retail marketplace continues to reflect underlying strength as a reflection of strong consumer spending.
In fact, in most submarkets availability rates for industrial and retail properties continue to decrease as rents also rise.
Northern New Jersey’s industrial market is expected to continue to show strength and make a full recovery in the next six to nine months.
Users have come to recognize that market conditions offer many quality space availabilities at attractive rates. This trend is creating supply and demand constraints in the market, which will result in significantly increased rates in the near future.
This activity is positive for New Jersey, and with the absorption of industrial space, we expect to see gains in employment and a boost to the overall economy as well.
With our outstanding highway system, central location between the New York and Philadelphia metropolises and our access to major ports, New Jersey is, and will always remain, a very important hub for industrial users.
New Jersey’s office market, however, will be several years in the recovery mode.
Although the current quarter-to-quarter numbers show a slight increase in availability, the amount of available space is alarming and it will take a long time for absorption to return availability to normal levels.
One of the most critical issues preventing the office market from fully recovering is the lack of job creation.
It is jobs that move companies to occupy more space and without employment opportunities, we are in for a long haul. Somerset, Middlesex and Morris Counties, in particular, are the weakest since they have been most dependent on the white collar, high tech, pharmaceutical jobs that are not being created at the present time.
The good news, however, is that tenants in the market are securing excellent leasing terms as many developers and owners have dropped rents significantly and are offering very compelling incentives.
What demand there is in the market is coming largely from pharmaceutical, biotech and life sciences companies, in addition to law firms and retailers. Build-to-suit projects are also on the rise, as companies attempt to take advantage of low interest rates to purchase facilities.
Another trend in New Jersey is the redevelopment of older buildings in order to accommodate the needs of today’s tenants, thereby making them more marketable.
Issues being addressed include rewiring for high-speed voice, data and Internet usage, raising ceiling heights, and improving loading–making facilities more attractive to new users. We are also witnessing the conversion of buildings and re-fitting them into alternative usages such as residential and retail.
New Jersey continues the renaissance of its urban areas in cities like Newark, Harrison, Trenton, Asbury Park, the Amboys and, of course, the entire Hudson River waterfront.
The initiatives in place in these communities are definitely sustainable, which bodes well for new development opportunities.
Despite some soft pockets in the office market, I believe the future is very positive for New Jersey’s real estate marketplace.
The State’s underlying strength lies in the diversity of its economy; talented and eager labor pool; and its strategic location between New York City and Philadelphia.
COPYRIGHT 2004 Hagedorn Publication
COPYRIGHT 2004 Gale Group