20A — January 15 - 28, 2016 — 2016 Forecast — M id A tlantic
Real Estate Journal
www.marejournal.com
2016 F orecast
By Brian C. Hosey, Marcus & Millichap 2016 will be an active year for investment sales
2 015 was a very active year for investment sales. The transac-
1. Overwhelming Demand for Investment Real Estate. There is strong demand for investment real estate driven primarily by the lack- luster performance of alter- native investments. As of the writing of this piece, the Dow Jones Industrial Average is down 7 percent year-over- year while the NASDAQ composite is down over 600 points from its high in July. Meanwhile the Shanghai Composite has lost over 40 percent of its value in the last six months. It’s so bad in
China that in the first week of this year trading had to be stopped with a so-called “circuit breaker” mecha- nism. When you pile on the political unrest around the world, investment real es- tate, especially in primary markets is viewed as a safe way to create and preserve wealth. 2. Limited Supply. There is simply not enough qual- ity investment real estate to satisfy the demand. In many cases we are seeing multiple offers and bidding wars on
good real estate in good locations. Many buyers are waiving their mortgage con- tingencies and performing due diligence prior to going under contract. Exchange buyers are the most aggres- sive, usually redeploying capital from New York City where cap rates can be 300 basis points lower. 3. Improving Economy. Over the past twelvemonths, more than 20,500 workers in Northern New Jersey found employment. This year, total employment in Northern
New Jersey will increase 1.4 percent as employers create 20,000 jobs. The New Jersey economy is gather- ing momentum which has increased demand for both apartments along transpor- tation routes and industrial space near the busiest port in the East Coast. In 2014, the Port of New York and New Jersey set an all-time high for total cargo traffic with more than 3.3 million cargo containers passing through the port, up 4.1 per- cent from the previous high set in 2012. In anticipation of future demand, developers are beginning speculative projects. There are nearly 15,000 apartment units un- derway or in final planning stages in the market with completion dates scheduled through 2017. On the com- mercial side, developers are scheduled to complete 1.5 million square feet of indus- trial space and 1.4 million square feet of retail space in the next 12 months. 4. Low Interest Rates. The yield on the 10-year U.S. Treasury, an important benchmark in real estate lending, has hovered in the low-2 percent range through- out 2015. With portfolio lenders currently financing stabilized assets in the 4.8 to 4.5 percent range, investors have been enjoying an era of historically low interest rates and abundant com- mercial credit. Compare our current lending environment to the early 1980s when the 10-year U.S. Treasury was at 16 percent, and it becomes clear how favorable our cur- rent situation is. We predict that interest rates will re- main relatively low, at least through the election. All of the above forces have created a “perfect storm” for both buyers and sellers. Buy- ers are enjoying favorable financing terms and rising rents while sellers are ben- efiting from strong demand and limited supply. For sell- ers, it is especially important that they are represented by a real estate professional that will act in their best interest and make sure they aren’t leaving any money on the table. Brian C. Hosey is regional manager of Marcus &Milli- chap’s New Jersey office. n
tion velocity across the four major food groups – a p a r t - ments, re- tail, office, and indus- trial – in- creased by
16 percent year over year; and we are projecting more of the same in 2016 for sev- eral reasons: Brian C. Hosey
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Below is a Sampling of Our Recent Closings
CLOSED
CLOSED
CLOSED
Shopping Center Cranford, NJ $7,500,000 Agents: Michael Lombardi, Robert W. Angus, Julienne Pape
63-Unit Multifamily Long Branch, NJ $6,500,000 Agent: Nat Gambuzza
Office Paramus, NJ $4,600,000 Agents: Alan Cafiero, Ben Sgambati
FINANCED
CLOSED/ FINANCED
CLOSED
Net-Leased Child Care Toms River, NJ $3,650,000 Agent: David E. Thurston, Charles Loccisano
Mixed-Use Old Bridge, NJ $6,000,000 Loan Originator: Eric Seidel
Net-Leased Pharmacy Franklin, NJ $9,141,000 Agents: Dean Zang, Mark Taylor, Karly Iacono Loan Originator: Tom Graziano
To access the investment market, contact the market leader. Brian Hosey Regional Manager (201) 582-1000 brian.hosey@marcusmillichap.com
Offices Throughout the U.S. and Canada
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