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 …
New Jersey
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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