22A — July 17 - 30, 2015 — M id A tlantic
Real Estate Journal
www.marejournal.com
ARSIPPANY, NJ — New Jersey’s com- mercial real estate Focusing on retail, industrial, multifamily and financing Mid Atlantic Real Estate Journal’s Forecast Summit identifies market insights and trends P M id A tlantic R eal E state J ournal
shortage nationwide but New Jersey in particular has a drastic deficiency of affordable and subsidized housing. This is going to continue to be an im- portant part of the multifamily picture moving forward.” Millennials will continue to drive the multifamily mar- ket, according to the panel- ists. These astute “renters by choice” see apartment living as a quality of life choice, and are drawn to the flexibility, convenience, proximity to mass transportation and amenitized lifestyle that apartment living provides. Multifamily housing was cited as one of the safest and strongest commercial real estate investments by the pan- elists, with pent-up demand the norm for high-quality, well-located real estate prod- ucts. Those participating on a panel entitled, “Opportunities in the Industrial Real Estate Market” noted that the state’s industrial sector also has more than stabilized, with balanced pricing and solid fundamentals keeping the market strong. Panelists included moderator Richard Burrow , senior prin- cipal at Langan ; Bo Farkas , senior vice-president of Sitex Group ; Peter Crovo , senior vice-president at Prologis Inc.; John M. Clinton , senior vice- president of Clarion Part- ners ; and Alec Taylor , part- ner at Matrix Development . Sponsors of the MAREJ New Jersey Commercial Real Estate Forecast Summit included Cushman&Wakefield; Sitex Group; Meridian Capital Group; Prologis; Chiesa, Shahinian & Giantomasi PC; Marcus & Millichap; and Langan, along with organizational sponsors the Society of Industrial and Office Realtors; BOMA New Jersey; IREM; IFMA New Jersey Chapter and IOREBA. n tions for an urban rental property; determining why a luxury condominium was selling slowly and recom- mending steps to create a better ROI; reviving a struggling master-planned golf community; and de- termining the best course of action for a failed age- restricted project that had been partially built and sold before running into market resistance. n
yes. “The opportunities we are seeing are thornier to work out and need specialized expertise. These are problems we think we can solve and are anxious to solve. We do whatever we have to in order to get a deal done,” commented Herrick. The panelists also comment- ed that Europe’s financial and political crisis, specifically Greece, along with Portugal, Italy and Spain may impact capital markets. “It doesn’t seem that Europe has a coher- ent financial plan,” Herrick said, “I am often asked ‘Where we are in the cycle?’ My typical answer is we are in the fifth or sixth inning. Everything seems pretty healthy in the North- east, there is a continued but slow recovery nationwide, but given the financial concerns in Europe, China and Puerto Rico there are still some un- knowns.” Multifamily Market Shows Strength The “Apartment Market/ Multifamily Overview” panel referenced a booming multi- family sector in New Jersey, with vacancy rates at historic lows, and demand at an all- time high both from investors and prospective tenants. Led by moderator James Rhati- can , member of the real estate, development and land use group of Chiesa Shahinian & Giantomasi PC , panelists in- cluded Chad Buchanan , chief investment officer of Tryko Partners ; Russell Tepper, se- nior managing director of Mill Creek Residential ; Scott Jackson , managing director of Meridian Capital Group ; and Jose R. Cruz , senior man- aging director of HFF . “Given current market fun- damentals, it’s hard to see how the New Jersey multifamily market can get much better,” said Buchanan, who also cited a shortage of affordable hous- ing in the state. “There’s a fit or a mismatched eyesore for the community. Added value of a residential prod- uct can, and should, mean added ratables for a town. Q: Can you provide ex- amples of how Marketlog- ics’ research has helped to achieve successful results for a client or project? Examples of Marketlog- ics’ recent studies include analyzing the best return on investment (ROI) op-
market is showing encourag- ing signs of stabilization and growth – particularly across the retail, warehouse/indus- trial and multifamily sectors – according to industry experts who participated in the Mid Atlantic Real Estate Jour- nal’s (MAREJ) New Jersey Commercial Real Estate Fore- cast Summit. The morning event, which recently took place at the Sheraton Parsippany Hotel in Parsippany, brought together more than 100 of the region’s top commercial real estate professionals, along with four panels of industry leaders rep- resenting the retail, multifam- ily, warehouse/industrial and financial markets. A panel entitled “Retail Update: Opportunities and Trends” was moderated by Matthew K. Harding , presi- dent of Levin Management . Panelists included Marta Person Villa , vice-president of CBRE ; Michael Lom- bard i, director of the Net Lease Property Group and vice-president of investments for Marcus & Millichap ; and Nancy Erickson , senior director/N.J. retail leader for Cushman & Wakefield . The experts cited the Garden State’s retail real estate mar- ket as dynamic and robust. Va- cancies created in recent years by retailers who did not survive the downturn are mostly filled with tenants such as specialty grocers, affordable fitness chains, fast casual chains and restaurants, as well as a range of service providers including banks and urgent care centers. Unique concept tenants and non-traditional categories, such as children’s entertain- ment/play zones, also are help- ing to redefine retail tenancy, according to Erickson. “Fitness continued from page 2A A: Ideally market research should be done during a due- diligence period to help de- cide if a land purchase really will pencil out as a builder/ developer thinks. Market research will help to decide what municipal approvals to go for (meaning what prod- uct type, size and number of homes/units). The market research also can paint a picture of the marketplace
Retail Update: Opportunities and Trends was moderated by Matthew K. Harding , president of Levin Management . Panelists included Marta Person Villa , VP of CBRE; Michael Lombard i, director of the Net Lease Property Group and VP of investments for Marcus & Millichap ; and Nancy Erickson , senior director/NJ retail leader for Cushman & Wakefield .
tenants continue to grow, along with dine-in movie the- aters. A range of different pizza and hamburger concepts are seeking retail space, while small and health-focused gro- cers continue to open in key markets.” Outlet malls are growing, traditional malls are re-ten- anting and urban downtowns are experiencing retail re- vival, with locations such as Hoboken and Jersey City in demand. “Urban retail is thriv- ing,” said Villa. “In Newark, Whole Foods is coming to the old Hahne’s department store building. Additional leases are bringing more national brands to the city. Many of these re- tailers would have not even considered moving to Newark just five years ago.” Lombardi noted increased demand for retail investment products and cited a decline in retail cap rates that aligns with the demand for this in- vestment type. “Cap rates have sunk to an all-time low across multiple single-tenant property types and sectors,” he said. “Right now we are fully compressed and I don’t know howmuch tighter cap rates can get. Exchange buyers are driv- ing this, and in my opinion, it’s a trend we will continue to see at least through 2015 despite a slight uptick in interest rates.” Increasingly, retailers are drawn to mixed-use develop- ments that re-create the live- to help determine if there is a market and how deep that market potentially is for the product and prices needed to make the entire development a success. Q: Can lenders and mu- nicipalities also benefit from timely market analysis, and if so, how? A: Without a doubt. Lend- ers are at risk just as much as developers, and they also need to minimize their risk
work-play appeal of a strong downtown. Erickson cited a new residential and com- mercial project in downtown Montclair. “Valley & Bloom is a mixed-use complex con- sisting of 258 apartments, 20,000+ s/f of retail, 20,000+ s/f of professional office and 571 parking spaces. These types of projects give retailers a built-in customer base from Day 1. Traditional amenities, including banking, food, cellu- lar, beauty and fitness tenants do particularly well in these settings.” Capital Markets Update A panel entitled, “Capital Markets Update” discussed today’s commercial real estate financing market. Moderated by Ronald M. Shapiro , ex- ecutive director of the Rutgers Business School’s Center for Real Estate , the panel included Sanford Herrick , founder and managing prin- cipal of Case Real Estate Capital ; Peter Rand , vice- president of KeyBank Real Estate Capital ; and Robert S. Lipson , senior vice-presi- dent of Berkadia . Panelists noted an uptick in value-add deals and new- construction projects, and opined that while interest rates remain low, investors are unwilling to take uncovered risk. “The question of the day is ‘Are you seeing fewer oppor- tunities?’ Herrick responded that for Case the answer is and uncover the unknowns. Municipalities can benefit from understanding the dynamics of their respec- tive housing markets, local housing demand and loca- tion quotients that would compare a specific munici- pality’s housing composition to that of a larger, yet simi- lar, area. Municipalities also should want to know if a particular proposed project is going to be a good
Market Research is Key for Building Successful Real Estate Developments . . .
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