Northeast Market Reports

Affordable Housing Benefits Communities As Well As Residents

by Taylor Williams November 6, 2019

For the past 10 years, Walters has been creating premium affordable housing that is 100 percent income-restricted and sustainable. The company has delivered a dozen developments throughout New Jersey, and several more are currently under development. The positive benefits and lasting effects of affordable housing impact both the residents living in the homes as well as the communities in which they are located. Each year, more people struggle to afford living in the communities where they work because of a lack of affordable housing stock. Even older adults who have lived for decades in a community have few opportunities to downsize. Many young adults who want to raise their own families in the communities where they grew up cannot afford “starter homes” today. Affordable housing, however, enables people to live where they choose based on their needs and aspirations. A Princeton University study of affordable housing development in Mount Laurel, New Jersey, found numerous benefits: Families moving into high-quality affordable housing experience a safer neighborhood, lower crime rates, better mental health, strong rates of employment and higher wages. By saving money on rent, families can spend more of their household incomes on essentials such as food and healthcare. The study …

November 6, 2019

Affordable Housing Market Reports Multifamily Northeast Northeast Market Reports

Making Up for Lost Time Can Be Costly for Affordable Housing Developers

by Taylor Williams October 30, 2019

Despite evidence of their own experience, developers of affordable housing can still minimize the incidence of unforeseen delays and underestimate their costs. Capital One has 75 such developments under construction, and more than half are in some way behind schedule. This is neither unusual nor a comment on our partners’ skills as developers of much-needed affordable housing. The point is that making up for lost time can be particularly costly. While unforeseen delays are no more common in affordable housing than in other building types, developers of this product type run the unique risk of losing crucial tax credits when they miss a place-in-service deadline. Loss of tax credits as a funding source, which can account for as much as half the capital funding project costs in some cases, upends the carefully crafted funding structure of the development. Other developers might be content to pay an extra month’s interest on their construction loan while addressing the source of delay, as this constitutes a less-significant sacrifice at today’s rates than in the past. But affordable housing developers must incur extra expenses and do whatever is necessary to get the project back on track. Unforeseen Bedrock A case in point is the …

October 30, 2019

Market Reports New Jersey Northeast Northeast Market Reports Office

New Jersey Office Market in Good Shape Heading into Final Quarter of 2019

by Taylor Williams October 23, 2019

Employment growth in New Jersey continues to trend higher. Since the low point of the last recession in 2010, the state’s private sector has seen almost 409,000 new jobs added (through July). Of the office-using industries, professional and business services have shown healthy annual job growth — up 13,900 jobs — while financial services jobs have recorded declines over the past year. Meanwhile, the state’s unemployment rate continued to tick lower to 3.3 percent (as of July), the lowest in its recorded history. Within this context, the fundamentals of the New Jersey office market remain healthy as we enter the final quarter of 2019, with absorption totals remaining in the black, vacancies sinking lower and asking rents trending upward. Regional Discrepancies Northern New Jersey’s vacancy rate had dropped to 18.3 percent by the middle of 2019, the lowest point since the end of 2012, while central New Jersey checked in at 15.5 percent, marking four consecutive quarterly decreases. Space has tightened in some key submarkets, making landlords increasingly bullish. As a result, asking rents in Northern New Jersey have risen to $31.62 per square foot — an all-time high and a jump of 17.8 percent over the last four years. …

October 23, 2019

Industrial Market Reports New Jersey Northeast Northeast Market Reports

Demand Outpaces Development in New Jersey’s Industrial Market

by Taylor Williams October 16, 2019

Across the Northeast, the high level of demand from retailers, food companies and transportation/logistics firms is outpacing the level of development and redevelopment in the industrial market, causing a severe shortage of product and skyrocketing rents across the region. At the center of this trend is New Jersey, situated in the heart of the Northeast’s Boston-Washington, D.C. corridor between Philadelphia and New York City. The demand for industrial space in New Jersey is driven by its strategic location and sophisticated infrastructure including air, freight, port and rail options linking it to the rest of the country. Despite the near-record level of development in the industrial sector, the state faces a product deficit that even the nearly 5.3 million square feet of space currently under construction cannot satisfy. In fact, 93 percent of the more than 21 million square feet that was developed in 2017 and 2018 has already been leased. Demand has pushed the average asking rent across the state to $8.41 per square foot, an all-time high. Moreover, asking rents are often not listed in new buildings or those under construction, many of which have rents as high as the low teens. Not listing the asking rents demonstrates how …

October 16, 2019

Industrial Market Reports New Jersey New York Northeast Northeast Market Reports

Industrial Development Shifts Westward From Port

by Taylor Williams October 2, 2019

Demand for industrial space is roaring throughout the submarkets surrounding the Port of New York and New Jersey, propelled by the port’s handling of a record amount of cargo thus far in 2019. As a result of the healthy demand, as well as more product coming in and out of the port, landlords are enjoying positive rent growth accentuated by a limited supply of quality industrial space. The port experienced record growth in cargo volume handled during the first six months of 2019, according to internal data from the organization. The number of 20-foot equivalent units (TEUs) handled by the port has already exceeded 3 million for the year and surpassed 611,000 in June alone. This figure represents an all-time record for the port during the first half of the year, enabling it to surpass the Port of Long Beach for the first time in 20 years. Increasing amounts of inventory coming in and out of the port translates to greater demand for industrial space to store, process and ship product. But the port submarket has but a meager supply of real estate to meet the demand. Due to a limited space available for lease, the industrial submarket experienced negative …

October 2, 2019

Market Reports Northeast Northeast Market Reports Pennsylvania Retail

Experiential Retail Takes Philly by Storm

by Taylor Williams September 25, 2019

The evolution and transformation of Philadelphia’s retail real estate market is in full swing, as evidenced by the arrival of several long-awaited shopping and dining concepts, the growth of retail in mixed-use settings and the balanced levels of demand between urban and suburban submarkets. According to the latest data from CoStar Group, over the last three years the Philadelphia metro area’s retail inventory has grown by about 1.3 million square feet per year. The development pipeline is leveling off, with less than 700,000 square feet of retail product currently under construction, and steady demand has pushed the market’s vacancy rate down to 4.2 percent. While the quantity of annual new space added has been on par with the national average for primary markets, the quality of that space and the fundamentals that drive demand for it have made Philadelphia a key market for expanding and new-to-market retailers. “Philadelphia is a market with many millennials and college students, a dense residential downtown area and a thriving tourism industry,” says Doug Green, managing principal at brokerage firm MSC Retail. “If you’re Bonobos, Warby Parker or Untuckit, Philadelphia is going to be one of your stops, because we check all the boxes that …

September 25, 2019

Industrial Market Reports New Jersey Northeast Northeast Market Reports

Array of Industries Drives New Jersey Industrial Market’s Growth

by Taylor Williams September 18, 2019

New Jersey’s industrial market continues to expand, driven by a plethora of industries, including retail, manufacturing, food companies, transportation and logistics. As the popularity of e-commerce shows no signs of abating, New Jersey has become a key location for distribution centers and last-mile delivery hubs to serve the entire Northeast region. E-retailers are scooping up available industrial space, taking advantage of New Jersey’s excellent air, freight, port, and rail infrastructure that links it to the rest of the region and the country. Increasing Demand After taking a slight breather during the first quarter of 2019, in part due to a lack of available high-quality space, total leasing activity has increased by 20 percent during the past three months, bolstered by more than 20 leases exceeding 100,000 square feet. Absorption was widespread, with occupancy level increases in 16 of 25 submarkets for both the quarter and year over year. In total, 2.4 million square feet of positive net absorption was recorded during the second quarter of 2019, the highest level since the third quarter of 2018. Moreover, occupancy levels increased by 8.6 million square feet during the past 12 months, the eighth consecutive quarter where more than 8 million square feet …

September 18, 2019

Market Reports Northeast Northeast Market Reports Office Pennsylvania

Strong Demand, Record Rents Drive Office Investment, Development in Philadelphia

by Taylor Williams September 11, 2019

Robust employment and population growth are fueling Philadelphia’s renaissance and propelling the region’s office sector to new heights. The lack of new office construction over the past decade has driven rents to record levels and is creating value-add acquisition opportunities throughout the region. With a tight labor market and talent acquisition at a premium, companies want to lease state-of-the-art workspaces that attract future employees. Key features of these spaces include access to public transit and surrounding retail and restaurant options. Limited availabilities within this product type are driving rents for quality space, as well as the development pipeline for new office buildings. However, after years of little construction, several proposed office buildings in both downtown and the suburbs are close to breaking ground and creating the next crop of new office inventory for the region. Record Rents In the second quarter of 2019, average asking rents for office properties in downtown Philadelphia hit a record $31.33 per square foot, a 20 percent increase over the past five years. This growth has been driven by out-of-town investors acquiring buildings and raising rents, as well as by growing demand for downtown office space, both from new in-bound demand and organic growth from …

September 11, 2019

Market Reports Multifamily Northeast Northeast Market Reports Pennsylvania

Philadelphia’s Multifamily Market Can Withstand A Broader Economic Downturn

by Taylor Williams September 4, 2019

As we look toward the end of 2019, multifamily investment sales and mortgage banking transactions in the greater Philadelphia market are at an all-time high. For lifelong Philadelphians, it’s exciting to witness the area’s longstanding foundation successfully take shape through numerous real estate projects in the city and its suburbs. The Philadelphia multifamily market continues to capture interest from a variety of capital sources. Berkadia’s Philadelphia team alone has $4.3 billion in firm or funded transactions from January through August of this year. Specifically, institutional investors have demonstrated an increased interest in this market, as both national and international players continue to recognize the area’s relative value and sound fundamentals. We expect these trends to continue throughout the remainder of 2019 and into next year, regardless of any major headwinds at the macro-economic level. The driving forces behind Philadelphia’s success include a robust volume of new Class A developments, a more tactful approach to value-add deals, marketplace efficiencies and most of all, a continued demand for multifamily product. The market’s new Class A properties have been well-received in terms of leasing velocity. More construction capital is available than in years past; top-of-the-market rent discovery has generally proven out. In addition, …

September 4, 2019

Industrial Market Reports Northeast Northeast Market Reports Pennsylvania

Philadelphia’s Industrial Market Is Ready for More Speculative Development

by Taylor Williams August 28, 2019

Demand for industrial space in Philadelphia and suburban Pennsylvania counties has been strong over the last five years. The last meaningful wave of speculative construction occurred in 2002. Couple that with the fact that much of the area’s industrial inventory was built prior to 1980, and we have a market that is ready to absorb a rising volume of speculative product. Organic growth and new-to-market requirements have absorbed most of the quality supply, leaving inventory that is at 40 to 50 years old and functionally obsolete for many requirements of today’s e-commerce users. Activity has been slower in the year’s first six months as companies have been more cautious about planning for future growth. Another factor has been the lack of quality-space options, with less than 1 percent of the inventory considered institutional, Class A space. This dearth of quality space is reflected in the single-digit vacancies. Developers, tenants and brokers will be watching closely as over 5 million square feet of speculative industrial space is projected to deliver in the next 12 to 24 months. Strong Urban Demand There is pent-up demand from local warehouse and manufacturing companies as well as increasing demand from third-party logistics (3PLs) users, food …

August 28, 2019

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