What comes to mind when you say the name “Hoboken” today? A thriving downtown area filled with young, hip residents, high-class retail and 24/7 traffic that rivals areas of downtown Brooklyn. However, that wasn’t the case 10 years ago. National and regional tenants seeking space would first — and in most cases only — look to the suburban centers that were the heart of New Jersey life. Downtown retail areas were seen as lunch-driven areas boasting only five-day foot traffic and not enough parking. Now mainstays like Starbucks, Chipotle and Panera Bread have all made a home for themselves in Hoboken. What has brought about this change — which has seen Hoboken thrive but also brought about a new era of downtown retail that can be seen in the emerging neighborhoods of Newark and Jersey City? A prime factor in these areas’ rise to prominence has been the massive swell of development, not only in office towers but in entertainment centers and residential hubs. The opening of the Prudential Center in Newark four years ago revitalized the area with more than 200 events each year, including home games for the New Jersey Devils. The project was truly the first …
Market Reports
New Jersey’s industrial market is showing signs of continued improvement, as evidenced by increased investment sales activity and the return of speculative development to the region. A number of significant development projects are already in progress, as well as a few proposed projects, including 2.8 million square feet of new construction at 2450 U.S. Highway 130 and 2.6 million square feet at Cranbury Half Acre Road, both located in Cranbury and within the Exit 8A submarket, which benefits from a central location that provides tremendous access to points both north and south. The Central New Jersey industrial market continues to have positive momentum with 583,653 square feet of positive net absorption in the third quarter, leading to a decline in the overall vacancy to 7.8 percent from 8.0 percent in the previous quarter. The vacancy rate is now below the 10-year historical average of 8.3 percent, an impressive recovery from a peak vacancy of 10.7 percent in the third quarter of 2009. Overall, market fundamentals remain strong and demand is expected to remain high for the remainder of 2012 and into 2013 based on a sizable number of tenants in the market and pending deals expected to close within the …
Despite the challenging and uncertain economic climate in New Jersey where the unemployment rate is now at its highest level in three decades and major companies are placing large blocks of space on the market, there is at least one encouraging sign of progress and glimmer of hope. Due to a number of factors, small and mid-sized biotech companies are choosing Central New Jersey — and areas adjacent to the Interstate 287/78 corridor — to base their operations. Several companies have located their headquarters or expanded branch functions in the I-287/78 corridor during 2012. In Bridgewater, Allergan leased 93,000 square feet, Dendreon leased 39,940 square feet, while Aptalis Pharma expanded into a total of 50,000 square feet. In Basking Ridge, Celgene renewed its 90,000-square-foot lease and Ipsen leased 32,500 square feet. Outside the I-287/78 corridor, Watson Pharmaceuticals recently expanded into an additional 32,000 square feet in Parsippany, and leased 32,000 square feet of lab/administrative space in North Brunswick. A recent study from BioNJ, a 300-member organization founded in 1994 that is focused on advancing the growth and prosperity of New Jersey’s biotechnology cluster, reinforces this trend and paints a vivid picture of its impact over the past few years. The …
The dense markets of northern and central New Jersey are showing some encouraging signs of momentum. Over the past 18 months, retailers have flocked to places like Paramus, Millburn, Wayne, Totowa, Springfield/Union, Livingston, East Hanover and Jersey City/Secaucus, to name a few. They are well aware that the major malls and retail corridors of Northern New Jersey, in particular, draw lots of traffic from nearby New York City. The pace of new construction has been sluggish in part because lenders now demand equity stakes of around 40 percent on projects that used to be financed at 70 or 80 percent. Therefore new supply is limited, which is helping to push up rents and drive down vacancies. In the northern and central parts of the state, in fact, the vacancy rate now stands at about 10 percent—a big improvement over the 20 percent average of 2010. Paramus, the state’s top retail market, has seen quite a nice recovery. Here, rents of smaller stores of less than 3,000 square feet now range from $35 to $60 per square foot. At stores of 5,000 to 10,000 square feet, space is leasing for between $30 and $40 per square foot. Paramus’ medium boxes, which …
What was previously considered a “soft patch” in the U.S. economy is now indicative of a long-term economic realignment, as previously reported in the past quarter. A reversal of economic indicators, the downgrading of the U.S. credit rating, the debt ceiling debate, the European debt crisis, and market uncertainty are the cause of a decrease in consumer and business confidence across the board, both nationally and in New Jersey. The result is a continued slow recovery in the job market as corporations continue to build cash reserves, further delaying hiring, equipment purchases and real estate expansions. The situation in New Jersey mirrors that of the national picture. The overall real estate market in New Jersey remains weak, although there was a significant shift to direct leasing of Class A space versus the previous subleasing activity. However, the reductions in labor and space needs have led subleases to play an important role in the local market — tenants are leveraging their subleased spaces to negotiate better financial terms when renewing their leases. Vacancy Rates Vacancy rates continued to climb, with Class A office space coming in at 16.4 percent, a 0.2 percent increase from the second quarter. The Class B office …
In this sluggish real estate market, how is it possible that two major mixed-use projects are under construction? With redevelopment all but halted elsewhere, New Brunswick keeps pushing forward with new opportunities for change for the better. With the assistance of state and federal tax programs through the Urban Transit Tax Credit Program and New Market Tax Credit, projects are becoming a reality. These projects include the Gateway Transit Village and New Brunswick Wellness Plaza which are located within one city block of the New Brunswick Train station. Gateway Transit Village In early 2009, Gateway was the first project to be designated as eligible for the new Urban Transit Hub Tax Credit Program. Under the program, credits are issued against income taxes that would be owed by businesses locating within newly built offices within a mile of a transit center; the credits can then be used to attract tenants, or else be sold as commodities. Fast forward to April 8, 2011 —when Gateway held its topping off ceremony. The Gateway Transit Village, as its name spells out, will serve as a gateway between downtown New Brunswick and Rutgers University. College Avenue, the central spine of the campus will be directly …
Industrial demand in New Jersey has picked up dramatically over the past year, in tandem with a clear shift in corporate America’s mindset to get serious about dealmaking while conditions remain favorable. During the market downturn, tenants with two or three years left on their leases frequently tested the market, making offers that expected property owners and developers to assume the trailing liability of existing lease terms. Most owners simply were not willing to do that, and deals regularly fell apart or remained stagnant. Beginning in mid-2010 and through the first three quarters of 2011, we have experienced a promising increase in real commitments. In fact, during the first six months of this year, some 11.1 million square feet of new industrial leasing took place in Northern and Central New Jersey — a 74 percent year-over-year increase. This included 12 transactions over 100,000 square feet during the second quarter alone. The largest involved Wakefern Food Corporation’s impressive 1 million-square-foot lease at 8001 Industrial Ave. in Carteret. Why the jump? While we are seeing the stock market decimated what seems like every other week, corporate America for the most part is flush with cash. At this point, companies have extracted about …
Proving its historic resilience once again, a hale and hearty multifamily investment market continues to outpace other commercial real estate sectors in the wake of the latest economic dip. Thanks to an ailing housing market that doesn’t seem to have a tangible cure in the foreseeable future, the “new normal” in residential living is apartment rentals. Strong leasing fundamentals; 1950s-era, bank-friendly interest rates; and the lack of other risk-averse investment options have contributed toward a dramatic increase in sales velocity along the highly sought-after South/Central/Northern New Jersey corridor. Demand is unrelenting. Just 18 to 24 months ago, many investors were sitting on the sidelines waiting for multifamily properties to follow in the footsteps of other hard-hit commercial real estate assets, including office, non- grocery-anchored retail and industrial, where vacancies skyrocketed and lending came to a virtual standstill. These fears had little-to-no impact on multifamily properties, which possess certain inherent “recession-proof” characteristics. Rental living provides a viable, affordable alternative to people who are concerned about their long-term employment outlook, cannot qualify for a single-family residential home loan or are displaced due to rising foreclosures or natural disaster, such as flooding in the aftermath of Hurricane Irene. As the economic recovery continues …
Demand for industrial space remains moderate in Northern and Central New Jersey. People are, undoubtedly, out in the marketplace, but much of our regional activity ties to lease renewals. Tenants facing term expirations are opting to remain in place, reflecting the “wait and see” approach that so many companies have chosen in this tough economic climate. Relocations almost always involve a flight to quality, with tenants taking advantage of opportunities to land attractive deals for Class A space. Deals today are being made at aggressive rental rates. As a result, available Class A space, especially in the Exit 8A submarket, has seen some absorption over the past 12 months. Across all submarkets in Northern and Central New Jersey, renewal activity comprises the bulk of leasing activity. Although year-to-date leasing totals are up from a year ago by approximately 1.2 million square feet, vacancies have held steady during the past 12 months. At the end of 2010’s third quarter, the overall Northern and Central New Jersey vacancy rate rested at 11.3 percent. That figure is identical to the rate recorded at this time last year. The average direct triple-net rental rate for Northern and Central New Jersey was $5.84 per square …
Although many believe that the economy is starting to pick up, the “wait and see attitude” of many investors and companies still persists in the commercial real estate marketplace. Many are simply waiting for things to get better or waiting to see if, instead, things get much worse. Frank Gunsberg of First Service Williams says, “The economy is showing signs of picking up, although there have been fits and starts. I'm hopeful that we'll see a rebound by the end of the year and into 2010.” The seemingly perpetual wait and see attitude is having its way with the New Jersey office market as well. Gunsberg notes that many office tenants are asking for short-term lease renewals and extensions. Whereas, under typical market conditions office leases ranged from 5 to 10 years, tenants are asking for 1 or 2 years. “They just are not sure what is going to be happening with the economy,” he explains. “People are reluctant to do things even though this is probably one of the best times to jump. Landlords are willing to make concessions they would not normally make. If you have a good balance sheet, you are an extremely desirable tenant.” Although landlords …
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