Real Estate Journal — 2018 Forecast — January 12 - 25, 2018 — 9A


M id A tlantic

2018 F orecast By David Zimmel, CEO, Zimmel Associates Industrial investment progresses in 2018; Office to remain consistent with 2017 B arring any unforeseen events, and as long as interest rates stay close to look for in 2018. Obviously not every office building can be used for this, but it is viable for certain projects.

The industrial sector is cap- turing increased investor atten- tion. For the first time in many years rents are high enough to support the cost of building from the ground up. Prior to 2017, industrial investors were better off buying older build- ings and fixing them up. This is no longer the case. Now both rehabbing and new construction have appeal. Investors are open to being creative. A lot of builders are looking for office buildings to tear down and rebuild as ware- house space because it's the best use at this point. This is a trend

ley. There is new construction off of Exit 6 of the New Jersey Turnpike near Pennsylvania and also off of Exit 7. The de- velopment trend is going south and west. The office space market has improved a little bit. A lot of deals are being made and this will continue in 2018, but I do not think it will impact absorp- tion rates much. Excluding solid locations such as Metro Park or the Jersey City Waterfront, I think office is going to continue to be challenged over the next couple of years. The office market was already

overbuilt when the financial cri- sis hit in 2008, and it has never fully recovered, but with the improved economy some ten- ants will pay premium prices for space in highly desirable locations. Vacancy rates in overbuilt areas such as Parsippany and Somerset are still in the 20 to 25% range. Companies have more people working fromhome and they don't need as much office space. Rents for class A space are about $25 to $40 a s/f depending upon the location. In premium continued on page 18A

to where they are now, New Jersey’s office and industri- al real estate marke t s i n 2018 should be somewhat s i m i l a r t o 2017. I think

For instance, I recently sold a two-story 63,000 s/f office building in Bridgewater, NJ, to a buyer who is re-purposing it for self-storage. Onyx Equities recently bought an office build- ing in the Meadowlands and they're constructing a distribu- tion building in its place. Pennsylvania has benefited because there's not enough in- dustrial space available in New Jersey. Some companies have opted to go to the Lehigh Val-

David Zimmel

it's going to be another robust year for the industrial sector, but not as record breaking. The office market will be active, yet overall absorption rates will stay about the same. Industrial rents are the high- est I have ever seen in my 35 plus years of serving this mar- ketplace. We are getting users who are paying numbers they normally wouldn't pay. We see continued business expansion from tenants who want more space. Strong segments are third party logistics, pharma- ceuticals, research, lab and assembly. Rents for industrial space in Somerset, Middlesex, Essex, Union and Monmouth counties generally range between $6.75 to $8.50 a s/f, depending on building location, size, age and features. Three to four years ago the average rents for these markets were $4.75 to $5.50 a s/f, so the increase is quite marked. In certain Northern Jersey locations such as the Meadowlands, Central Bergen County and Newark, I'm hear- ing numbers in the $10.00 to $12.00 a s/f range for warehouse and distribution space. Rents may increase slightly in 2018, but not much. At some point businesses will not be able to afford them. Vacancy rates for our industrial exclusives, many of which are off of Exits 8 and 10 of the New Jersey Turnpike, are in the zero to 3 percent range. Our tenants re- new quickly to ensure they have the space. It all comes down to supply and demand. Although we see new big box construction, and reports say there is more than 7 million s/f of new or proposed industrial construction statewide, there is still not enough spec build- ing of divisible industrial and flex buildings for businesses that need anywhere from 5,000 to 50,000 s/f. I see this trend continuing because of limited land availability and the length of time necessary to go through the approval process.

Industrial Opportunities

For Lease: 102,000 Sq. Ft. Whse./Distribution Bldg. Located off of Routes 287, 78 and 22 | Easy Access to NJ Tpke. Exit 10

Available Immediately 24 ft. Ceilings 8 Tailboard Loading Docks 1 Ground Level Door

2500 Sq. Ft. Office Competitive Rent Wet Sprinkler Gas Heat

3 Finderne Ave., Bridgewater, NJ

For Sale or Lease: 50,000 Sq. Ft. Whse./Distribution Bldg. Located Off of Rte. 22, Close to Routes 78, 287 and NJ Tpke.

Expandable to 80,000 Sq. Ft. Freestanding Bldg. on 10 Acres 5,000 Sq. Ft. Office 3 Tailboard Loading Docks 1 Drive-in Door 24 ft. and 16 ft. Ceilings Dry Sprinkler

106 Meister Ave., Branchburg, NJ


ZIMMEL ASSOCIATES CORPORATE R EAL ES TATE S ERV ICES 1090 King Georges Post Road, Suite 808, Edison, NJ 08837 (732) 661-9200 • Fax: (732) 661-9617 • www.zimmel.com

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