6-26-15

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Real Estate Journal — Mid-Year Review — June 26 - July 16, 2015 — 15C

M id A tlantic

C onstruction

By David Kristjanson, Hollister Construction Services Despite challenges, significant activity for NJ development likely to continue through 2016

N ew Jersey and the greater metropolitan area have seen sig-

In addition to e-commerce, the food industry is another pri- mary user of industrial space in New Jersey with projections for continued growth. New Jersey and the greater metro market face numerous challenges during the next several years, but overall pros- pects are very positive, driven by a vibrant and expanding population base and by the rapid evolution of the retail and distribution model for the east coast. David Kristjanson is the vice president of Hollister Construction Services. n

programs continue to attract corporations to the state. Hol- lister is versed in the stan- dard operating procedures for compliance, and is positioned to support new companies as they move to New Jersey to take advantage of incentives. The remarkable growth of multi-family construction is driven by the enormous popu- lation of baby-boomers and millennials, which represents a large portion of the rental population. There has been a 26 percent increase in con- struction permits during the past year, and planning is in

late stages for several mid-rise and high-rise products that will keep the multi-family sec- tor hot in New Jersey through 2016. Towns with transit hubs will remain the most attrac- tive, while new opportuni- ties exist in some un-tapped suburban towns that offer a semi-urban structure. The industrial sector is an- other very strong market in New Jersey, and an asset class with low inventory. Hollister is currently working with e-com- merce operations, fulfillment centers, food and freezer stor- age, and manufacturing com-

panies that are taking large industrial and warehouse spaces. Construction has not outpaced demand, and ten- ants are signing longer-term leases because inventories are low and rents are increas- ing. Cheaper rent doesn’t always translate into cheaper operating costs, however, and tenants must be mindful of pallet layout and utilization of modern equipment. The ready availability of labor force is important in this sector, and is strong in specific areas, such as Perth Amboy, which may be the best in NJ for industrial.

nificant de- v e l o pmen t activity dur- ing the past two years , and despite some chal- l enges , we an t i c i pa t e that the pace

David Kristjanson

will continue through 2016. The commercial office market will remain in transition, while areas of opportunity will include the industrial, educational, healthcare and multi-family sectors. Job and income growth is key to activity in the com- mercial office market. With leasing up slightly in Class-A inventory during the first half of 2015, we are seeing opportu- nities in the pharma, technol- ogy and financial sectors. The most dynamic areas outside New York City include Jersey City, Newark, Metro-Park and the Princeton corridor. However, since asset classes such as multi-family and retail produce higher returns with less risk, many investors have continued to shy away from the office market. In addition, New Jersey’s commercial office inventory is aging, and a large portion requires significant upgrades in infrastructure and amenities, requiring sub- stantial CAPEX to make these properties attractive to ten- ants and investors. Another challenge to growth in the office market is a trend by corporations to occupy less space and employ more open work areas, reducing the square footage required by tenants. Helping tenants use space more effectively, and building to their needs -- especially around transit hubs -- will help the market to rebound. Numerous corporate cam- puses are currently under redevelopment and Hollister is forging partnerships with developers of these sites to facilitate the repositioning projects and to accommodate tenants as they move to the new spaces. The repurposed sites will likely attract at- tention from a variety of dif- ferent tenants, especially as the extraordinarily successful incentives available through the Grow NJ and Economic Redevelopment and Growth

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