B — March 14 - 27, 2014 — New Jersey — Mid Atlantic Real Estate Journal
www.marejournal.com
N orthern N ew J ersey By Brian Hosey, Marcus & Millichap Northern New Jersey investment market
E
ncouraging signs of eco- nomic growth greeted investors and commer-
Other economic indicators, including residential build- ing and retail sales, are also
nonetheless proven sufficient to elevate performance in the commercial property sectors.
region at a tight 3.1% at the end of last year. Prompted by strong property performance, multifamily developers across the country have crowded new projects into the development pipeline. This trend is evident in the projected completion of 3,500 rentals in 2014, mark- ing a quicker tempo than last year, when 2,700 units were produced. Barring an upside surprise in the job market, supply growth will likely exceed net absorption in 2014, pushing up apartment vacancy to 3.4%. Nonethe- less, this extremely low level
falls significantly below the forecast 5.2% vacancy rate nationwide and is surpassed by only New York City among nearby markets. The local retail property sec- tor is also staging a recovery. Relatively high incomes and elevated population density make the area a perennial tar- get for national and regional chains. New store openings in 2013 generated nearly 700,000 s/f of net absorption and slashed vacancy 130 ba- sis points to 6% during the year. An additional decline of 30 basis points is foreseen in 2014, though completions will increase to 400,000 s/f following two years of subdued building. Office properties are typi- cally the last property sector to recover coming out of an economic downturn, and the current cycle is no exception. Job growth in the region has not generated a significant amount of new space require- ments to substantially reduce vacancy. Vacancy ended 2013 below the 20% threshold and an additional decline to 19.6% will occur this year. A full- scale recovery in property operations will not likely gain steam until 2015, when addi- tional tenants will have back- filled under-used spaces and generate new requirements for larger layouts. Although the property sec- tors are at different points of the recovery cycle, investors remain active, closing deals on a broad spectrum of assets that meet a wide range of re- turn objectives. With strong property performance and ac- commodative capital markets, investors are aggressively pursuing multifamily assets throughout the region. In the retail sector, buyer demand exceeds the supply of proper- ties listed for sale, compress- ing cap rates as a result. Strip centers in densely populated retail shopping areas will garner first-year returns in the low-6 to low-7% range, and first-year returns on top single-tenant assets dip lower still. Office property values remain below prior peaks and, thus, offer investors solid up- side opportunities. Acquisition financing for these deals will become more widely available as buyer demand intensifies. BrianHosey is sales man- ager at Marcus &Millichap in New Jersey. n
c i a l p r o p - erty owners in Northern New Jersey as 2014 be- gan. An ini- tial reading o f t he j o b market re- vea l s t ha t
“Economic indicators, including residential building and retail sales, are also on an upward trajectory and offer promise of additional growth during the year ahead.”
on an upward trajectory and offer promise of additional growth during the year ahead. While a more vigorous pace of growth would clearly hearten investors and property own- ers, economic trends have
Multifamily is the strongest sector at this point in the eco- nomic cycle. Reflecting nation- al trends, higher home prices have shifted demand from ho- meownership to rentals, which put apartment vacancy in the
Brian Hosey
employers hired modestly last year, and a revision to 2013 results slated for late in the first quarter may show that payrolls grew more rapidly.
Exposure • Expertise • Results
Expertise Locally, Trusted Nationally Making a Market from Wall Street to Main Street
Below is a Sampling of Our Current Exclusive Closings
CLOSED
CLOSED
CLOSED
CLOSED
Shopping Center Hazlet, NJ $2,800,000
Shopping Center West Milford, NJ $4,075,000
45-Unit Multifamily West New York, NJ $6,060,000
14-Unit Mixed-Use Pequannock, NJ $3,553,000
CLOSED
CLOSED
CLOSED
CLOSED
5-Unit Mixed-Use Midland Park, NJ $3,000,000
52-Unit Multifamily Montclair, NJ $6,000,000
Office Livingston, NJ $6,270,000
Net-Leased Bank Flemington, NJ $3,050,000
To access the investment market, contact the market leader. Brian Hosey Sales Manager (201) 582-1000 brian.hosey@marcusmillichap.com
NJ Broker of Record: Michael J. Fasano
Offices Nationwide
www.MarcusMillichap.com
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