Real Estate Journal — 2017 Forecast — January 27 - February 9, 2017 — 7C
www.marejournal.com
M id A tlantic
I ndustrial R eal E state
By Jason M. Crimmins and Alessandro Conte, The Blau & Berg Company NJ industrial real estate forecast
A
fect on health care costs will not truly be felt for years after. Manufacturing will see some stiff competition from abroad as the strong dollar makes imports more competitive and therefore attractive. Higher wages will hopefully be offset by tax reform but that is yet to be seen. Political uncertainty inter- nationally will prove to be the biggest hurdle for capital mar- kets. The U.S, has always been the safe haven for investors, but will the new President of the United States, Donald continued on page 16C
lthough we are just a few days into 2017, the overall picture of the
impact on the economy. Unlike the Bush tax cuts of 2001 and 2003 when consumers used
United States... assumes a fis- cal stimulus that leads growth to rise to 2.3% in 2017 and 2.5% in 2018... This projection is consistent with the steepen- ing U.S. yield curve, the rise in equity prices, and the siz- able appreciation of the U.S. dollar since the November 8 election.” Overall inflation is expected to rise slightly in 2017 from 2% in 2016 to 2.5% in 2017. Although increases are expected in both energy and food, the strong dollar will help keep inflation from skyrocketing. We can expect the Federal
Reserve to increase interest rates in 2017 0.25 - 0.5 basis points to aid the strengthen- ing of the dollar. Better than expected employment reports for the last quarter and a fall in the NJ unemployment rate to 5.0 indicate that the labor market is tightening, giving the Federal Reserve cause for raising interest rates. Labor, energy, housing, education and health care are all ex- pected to continue to rise at or near the levels of 2016 and any changes to the Affordable Care Act will most likely not take effect until 2018; its ef-
economy and the NJ indus- trial real es- tate market is expected t o m i r r o r 2016 with a slight uptick. Despite con- tinued eco-
the savings to pay down debt, we ex- pect these tax savings to be used on de- ferred spend- ing for high ticket items such as home
Jason Crimmins
Alessandro Conte
nomic, political and financial uncertainties abroad, the Fed will most likely raise inter- est rates, but at a measured pace; the unemployment rate will remain relatively stable, buoyed by healthy consumer spending, and demand for space in the NJ industrial market will stay the course fortifying it to be one of the strongest cycles we’ve seen in the past thirty years. Traditional logistic compa- nies, Ecommerce and last mile delivery providers, such as Amazon, UPS, FedEx among others, have been driving the industrial market. Through 2017, they will continue to do so absorbing quality space at record pace along the NJ Turnpike. It has pushed va- cancy rates to historic levels below the 5% mark, increased rental rates and strengthened the need for speculative de- velopment. To date, there has been much discipline in the development arena despite having over 5.6MSF currently under construction, which is only half of what was under construction at the height of the last cycle in 2007. Amazon in itself has continued to ex- pand its presence in the New Jersey Metropolitan market, amassing a portfolio between 6 to 7MSF in the last few years. The heightened market has also attracted many capital in- vestors, domestic and abroad. Our record low vacancy rates, historically high rental rates and low capitalization rates have all driven demand for the institutional investment grade facilities, such as JP Morgan’s recent acquisition of 750 Union Blvd in Union, a newly constructed, fully leased 263,415 s/f facility purchased at a 4.48% cap rate, and the purchase of 350 Starke Rd. in Carlstadt, a 351,209 s/f facil- ity acquired with a ±4.25% cap rate. The US GDP is expected to be at or near 2% with Presi- dent Donald J. Trump’s pro- jected tax cuts having a quick
improvements, electronics, vacations and automobiles. According to a report provided by the International Monetary Fund, “The projection for the
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