7-17-15

2B — July 17 - 30, 2015 — New Jersey — M id A tlantic

Real Estate Journal

www.marejournal.com

N ew J ersey

By David Kristjanson, Hollister Construction Services Despite challenges, significant activity for NJ development likely to continue through 2016

N ew Jersey and the greater metropolitan area have seen signif-

care and multi-family sectors. Job and income growth is key to activity in the com- mercial office market. With leasing up slightly in Class-A inventory during the first half of 2015, we are seeing opportu- nities in the pharma, technol- ogy and financial sectors. The most dynamic areas outside New York City include Jersey City, Newark, Metro-Park and the Princeton corridor. However, since asset classes such as multi-family and retail produce higher returns with less risk, many investors have continued to shy away from

the office market. In addition, New Jersey’s commercial of- fice inventory is aging, and a large portion requires signifi- cant upgrades in infrastruc- ture and amenities, requiring substantial CAPEX to make these properties attractive to tenants and investors. Another challenge to growth in the office market is a trend by corporations to occupy less space and employ more open work areas, reducing the square footage required by tenants. Helping tenants use space more effectively, and building to their needs

-- especially around transit hubs -- will help the market to rebound. Numerous corporate cam- puses are currently under redevelopment and Hollister is forging partnerships with developers of these sites to facilitate the repositioning projects and to accommodate tenants as they move to the new spaces. The repurposed sites will likely attract atten- tion from a variety of differ- ent tenants, especially as the extraordinarily successful incentives available through the Grow NJ and Economic

Redevelopment and Growth programs continue to attract corporations to the state. Hollister is versed in the stan- dard operating procedures for compliance, and is positioned to support new companies as they move to New Jersey to take advantage of incentives. The remarkable growth of multi-family construction is driven by the enormous popu- lation of baby-boomers and millennials, which represents a large portion of the rental population. There has been a 26 percent increase in con- struction permits during the past year, and planning is in late stages for several mid-rise and high-rise products that will keep the multi-family sec- tor hot in New Jersey through 2016. Towns with transit hubs will remain the most attrac- tive, while new opportuni- ties exist in some un-tapped suburban towns that offer a semi-urban structure. The industrial sector is another very strong market in New Jersey, and an as- set class with low inventory. Hollister is currently working with e-commerce operations, fulfillment centers, food and freezer storage, and manu- facturing companies that are taking large industrial and warehouse spaces. Con- struction has not outpaced demand, and tenants are signing longer-term leases be- cause inventories are low and rents are increasing. Cheaper rent doesn’t always translate into cheaper operating costs, however, and tenants must be mindful of pallet layout and utilization of modern equip- ment. The ready availability of labor force is important in this sector, and is strong in specific areas, such as Perth Amboy, which may be the best in NJ for industrial. In addi- tion to e-commerce, the food industry is another primary user of industrial space in New Jersey with projections for continued growth. New Jersey and the greater metro market face numerous challenges during the next several years, but overall pros- pects are very positive, driven by a vibrant and expanding population base and by the rapid evolution of the retail and distribution model for the east coast. David Kristjanson is the vice president of Hollister Construction Services. n

icant devel- opment ac- tivity during the past two years , and despite some challenges, we anticipate that the pace will continue

David Kristjanson

through 2016. The commercial office market will remain in transition, while areas of op- portunity will include the in- dustrial, educational, health-

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