2A — December 12 - 18, 2014 — M id A tlantic
Real Estate Journal
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Mid Atlantic R eal E state J ournal Publisher ............................................................................ Linda Christman Publisher ............................................................................... Joe Christman Section Publisher .................................................................... Steve Kelley Associate Publisher .............................................................Alissa Aronson Senior Editor/Graphic Artist .................................................Karen Vachon Production Assistant ....................................................................Julie King Office Manager .................................................................... Joanne Gavaza Contributing Columnists ........ Steve Bussel, Bussel Realty Corp.; Beverly Blum, DesignWorkBuild; Jeffrey Furey & Matt Dolly, Transwestern NJ Mid Atlantic R eal E state J ournal — Published Semi-Monthly Periodicals postage paid at Rockland, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, 312 Market St. Rockland, MA 02370 USPS #22-358 | Vol. 26 Issue 23 Subscription rates: $99 - one year, $198 - two years, $4 - single copy
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Will current demand lease at new construction pricing? Steve Bussel, SIOR
J.D. Parker Manhattan
Brian Hosey New Jersey (201) 582-1000 Bryn Merrey Washington, D.C. (202) 536-3700
I n the last three quarters, the Northern/Central New Jersey industrial market has seen phenomenal leasing and sales activity. Net absorption and demand accompanied by an ever dimin- ishing supply of quality prod- uct has created an increase in leasing and sales prices. It has been a great ride in 2013, but much of this leasing absorption has been of exist- ing product at pricing that seems a bargain compared to where rental rates are today. Especially compared to prices of new construction. This begs the question: With the pace of new con- struction delivering 8 mil- lion square feet of brand new product in 2014 priced at between $6.50 and $10 per square foot NNN, is the market able to absorb this product at these much higher price points? In the past several quarters, existing availabilities were leased at rates, on average,
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with a spread of $2-3 per- square-foot lower compared to new construction. At what point will tenants be priced out of the market? With new construction costs roughly between $50-$80 before land costs, it is understandable that landlords need to charge this premium. However, this may present an interesting dilemma in the New Jersey marketplace going forward. As always, supply and demand are the driving forces. We’ll have to see over the next several quarters if new construction pricing can hold up. Certainly, the effi-
ciencies that the new product with 36’ clear ceiling heights presents is a supremely im- portant selling point. On a final note, look for market strength to continue into the next several quarters as the economy continues to improve. The wave of new construction product hitting the market this year and in 2015 will surely improve the market’s supply of quality product and raise overall ask- ing rates for all classes – A, B and C – in general. Steve Bussel is the presi- dent of of Bussel Realty Corp. n
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