New Jersey Industrial Market

New Jersey’s industrial tenants have access to one of the largest consumer markets and some of the best transportation infrastructure in the world. Proximity to key highways, seaports, railways and major national and international airports makes New Jersey important in the international supply chain. Currently, significant industrial development is taking place near the New York-New Jersey port complex, south along the New Jersey Turnpike and into Pennsylvania. While some of New Jersey’s industrial tenants praise the new developments near the ports, many others are looking south, attracted by lower land and labor costs there.

One significant industrial development near the ports is the former New York Times’ facility in Edison, which was recently purchased by KTR Capital Partners. The facility includes a 1 million-square-foot plant, a 385,000-square-foot warehouse and a 25-acre development site. The site creates an opportunity for large users to be closer to the port rather than their former options near exits 8A or 7A on the New Jersey Turnpike or in Lehigh Valley in Pennsylvania for similarly sized facilities.  

The iPort 12 International Trade & Logistics Center, a 1.2 million-square-foot Panattoni development in Carteret, is another recent development of note. The center is not only near New Jersey Turnpike exit 12, Newark International Airport and the Newark and Elizabeth ports, but its tenants also benefit from an Urban Enterprise Zone, Foreign Trade Zone incentives and proximity to an abundant labor force. Although developers remain optimistic regarding port-related development projects, leasing activity has been slower than anticipated over the past 12-plus months.

 The iPort 12 and the Elizabeth Seaport Business Park, a 1 million-square-foot ProLogis development in Elizabeth, are prime examples of significant new developments servicing the New York-New Jersey port complex. However, competing sites farther south in New Jersey and west into Lehigh Valley, where there have also been considerable new development, are forcing some tenants to reconcile the cost to dray containers from the port complex to outer locations with the lower cost of land and labor found elsewhere. The state of Pennsylvania is also offering attractive incentives to companies willing to locate in the Allentown/Lehigh Valley and Harrisburg areas.

As imports from Asia grow substantially each year, developments meant to serve port-related users in New Jersey — where overall industrial vacancy pushed up slightly to 8.1 percent from 7.6 percent at this time last year — will continue to draw attention. Only time will tell, however, whether tenants will choose to travel farther down the turnpike and into Pennsylvania or to pay the premium rents and property taxes that new developments near the ports command.  

— Craig Engelhardt is the managing director for Studley.

New Jersey Multifamily Market

The multifamily real estate market in New Jersey continues to remain very strong throughout the state. The rental market is experiencing the lowest vacancy rates in quite some time, and demand from investors in the multifamily arena far exceeds the amount of available properties on the market for sale. Counties that are experiencing the strongest activity include Bergen, Essex, Passaic and Monmouth, all with vacancy rates below 5 percent.

With respect to New Jersey’s multifamily rental rates, the strongest submarkets are on the waterfront where rates measure $2,000 per month and above. Average rental rates away from the waterfront are below $2,000, but remain strong in areas along mass transit hubs.  Areas that are more than an hour from New York City are the softest. 

New construction, particularly in the condo market in New Jersey, has slowed recently due primarily to the tightening in the debt market. Financing has become more challenging as lenders are becoming more conservative than they have in the past, requiring borrowers to make larger initial down payments. In addition, development in the multifamily sector throughout New Jersey in the past several years has slowed due to an increase in construction costs. As a result, developers are being very cautious and are focusing on more proven locations, such as middle to high-end waterfront rentals and condos that command higher sales and rental rates. There is, however, a flurry of new waterfront development activity in places like New Jersey’s Gold Coast, Asbury Park, West Long Branch, Perth Amboy and Atlantic City. 

New mixed-use development is also occurring in towns that do not have a traditional “walkable” downtown area, creating the downtown atmosphere with a mix of retail, apartment rentals and condos. This creates a desirable location for both shopping and living.  Examples of this include Livingston Towne Center and Englewood Towne Centre. 

New Jersey’s multifamily market is constantly changing, but the next area people should keep an eye on is the New Jersey to Pennsylvania corridor. New Jersey residents are beginning to move farther away from New York City where there is more affordable housing and large tracts of land for new development. Both residents and developers are rapidly discovering the appeal of the area.

Overall, New Jersey’s multifamily market is constantly evolving due to fluctuating rental, sales and vacancy rates, as well as in-demand locations. While no one can predict the future, the state is well positioned for continued growth based on its outstanding demographics, close proximity to New York City and a diversified economy.

— Jeffrey P. Wiener is the president of The Kislak Company, Inc. in Woodbridge, New Jersey.

New Jersey Office Market

The New Jersey office market has held true to predictions for the first half of the year. After moderate growth in the first quarter, the second quarter brought new hope to the economy, which, in return, has positively affected commercial real estate. With New Jersey’s close proximity to Manhattan, the demand for back-office operations, business continuity centers and data centers has increased in New Jersey. Other industries in demand for office space in New Jersey include life science companies, software companies, accounting firms and law firms.

The strongest submarkets in New Jersey in terms of decreasing vacancy and increasing rents are Metropark, Newark and the waterfront, while the Lower 287, the Brunswicks and Western Route 80 are exhibiting the highest vacancy rates. The Waterfront is one of the key markets in New Jersey with its close proximity to Manhattan, mass transit, competitive occupancy costs and a strong workforce. Its vacancy rate is 6.95 percent with an average asking rent of $32.75 per square foot.

The Newark/Elizabeth market is the second most diverse office market in New Jersey, and has shown great improvement with Class A properties having the lowest vacancy rates at 12.28 percent, and some of the highest asking rents, averaging $24.54 per square foot, in the state. The strength of the Metropark market is exemplified in a new speculative 10-story, 252,000-square-foot Class A office building that Atlantic Realty Development Group will break ground on this fall. Metropark’s direct vacancy rate for Class A office space is 10.79 percent and average asking rent is $29.45 per square foot.

New development has continued along the waterfront and is beginning to push towards the suburbs of New Jersey. The Gale Real Estate Services Company, in conjunction with JP Morgan, has been very active with the development of their Center of Morris County site in Parsippany. They recently completed 100 Kimball Drive, a 175,000-square-foot Class A office building, and recently broke ground on One Jefferson Road, a 100,000-square-foot Class A office building. Other developers, such as BPG Properties, Mack-Cali, Reckson, M. Alfieri Company and SJP Properties, are also very active in new development throughout the suburbs of New Jersey.

A constant New Jersey trend is redevelopment, which is reflective of the lack of available land in the state. Many owners and developers are therefore instituting capital improvement or repositioning programs for office buildings. For example, 23 Orchard Road in Princeton recently underwent a $3 million renovation from a single-tenant to a multi-tenant  Class A facility. Normandy Real Estate Partners recently began a multi-million-dollar renovation at Continental Plaza, a three-building Class A office complex in Hackensack.

As Manhattan’s vacancy rates decline and rental rates rise, New Jersey will continue to be well positioned for growth in its office market. As a result, new development is increasing, redevelopment is expanding and companies are looking to New Jersey.

— Kenneth Flynn, Jr., is a senior vice president of Jones Lang LaSalle.

New Jersey Retail Market

The retail real estate market in New Jersey continues to be strong throughout the state. Most landlords are experiencing low and stable vacancy rates at very strong rents, with retailers experiencing some of the highest sale volumes in the nation. There is currently an influx of mixed-use projects that incorporate retail, residential, office and hospitality in one location. This is useful in many of New Jersey’s urban areas, as these mixed-use properties serve as a basis for revitalization formerly depressed areas.

Lifestyle centers are a vital part of New Jersey’s retail landscape. These centers offer consumers a pleasant atmosphere and make specialty shopping a more convenient and enjoyable experience, rather than a chore. 

The Xanadu project in the Meadowlands has been creating a buzz since the beginning stages of the project. Once completed, Xanadu should transform the perception consumers hold about retail. This shopping experience will become an “event,” offering the entire family a new form of entertainment, combining shopping, dining, theaters and fitness in a new way.

There has been a great deal of development taking place in the suburban submarkets. Due to the fact that land available for development is scarce in New Jersey’s major markets, these particular markets have experienced a boom in residential development in the past few years; thus, creating a necessity for more retail. Additionally, many neglected downtown markets have started to witness a resurgence as more and more city dwellers leave New York City to plant roots in New Jersey. Some of these markets include Hoboken (largely known as the sixth borough of Manhattan) and Jersey City. Hoboken’s urban setting and upwardly mobile population is causing an explosion of residential development, which in turn fortifies Hoboken’s already strong retail presence.  Jersey City has also become the hometown for numerous Wall Street financial back-office operations. As a result, many residential developers, including Donald Trump, have started to develop here, which is expected to have a positive effect the city’s retail market over the next 5 years.

 As in the past, the major developers will continue to look for the next opportunity for a power center or a premium project. However, the retail market is seeing many newer, small-scale developers taking on projects that have less “marquee” values. 

While the New Jersey retail market is difficult to break into (for many retailers that aren’t here) due to escalating property and advertising costs, successful retailers will be able to secure large and stable sales as the result of New Jersey’s population density and high-income levels.

Overall, New Jersey’s retail market should remain strong in the upcoming months due to numerous new developments, low vacancy rates and high rental rates. With the onslaught of new residential developments and larger populations migrating to New Jersey, there will remain a strong demand in the state’s retail market.

— Richard Schulz is a senior vice president at CB Richard Ellis in Hoboken, New Jersey.

©2007 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.

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