2C — April 24 - May 14, 2015 — Shopping Centers — M id A tlantic
Real Estate Journal
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S hopping C enters
By Michael Oliver, HFF Market fundamentals and investor demand strengthen within New Jersey retail space
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nearly $219 million in retail trades in 2014, up 144% from $89.5 million in 2013. Significant trades included Greenwich Center in Phil- lipsburg (Warren County), a 182,583 s/f Best Buy and Petco-anchored center, which traded for $22.7 million. Ad- ditionally, the 114,964 s/f, A&P grocery-anchored Ridge Plaza in Jefferson (Passaic County) traded for $21.25 million. Urstadt Biddle also purchased a large four- property stabilized portfolio totaling more than $124.5 million for approximately
375,000 s/f. The first quarter of 2015 has also gotten off to a fast start with Simon Property Group ’s acquisi- tion of the 1.3 million s/f Jersey Gardens in Elizabeth (Union County) for more than $950 million. Fundamental to this in- creased transaction volume is the fact that the Northern New Jersey retail market had seen positive improve- ments in market conditions throughout 2014. According to CoStar, the overall va- cancy rate dropped to 5.6% after four straight quarters
of level or decreased rates. This was the result of posi- tive absorption of 2,775,899 s/f amidst the addition of 1,078,561 s/f of new supply in 2014. Average asking rents have also seen modest, yet increased rates of $19.94 psf in the fourth quarter of 2014. This is a 1.96% increase over the fourth quarter of 2013. Although all investors are seeing these positive trends, there are different players and strategies in this liquid marketplace. On the sale side, HFF is seeing private owners seeking to capture as- set premiums, while REIT’s continue to sell non-strategic assets and Institutions are recycling capital. On the buy side, REIT’s and institution- al investors are aggressively acquiring core, high barrier retail including malls and grocery-anchored shopping centers. Private capital is focused on opportunities to leverage and enhance investments through value add strategies. Demand for these two ends of the asset spectrum has resulted in premium pricing for these best-of-class and value add assets. Retail properties that fall within the “middle”, properties with short term leases, co-tenancy exposure, lack of sales history, etc. have not been receiving strong in- vestor demand unless priced accordingly. Moving further into 2015, we continue to expect strong demand from investors of all types within the retail space in New Jersey. Both market and economic fundamentals remain strong in the local market and we thus expect both the number of transac- tions and the aggressiveness of pricing to continue to rise for the right types of assets (core and value add). Michael Oliver is an associate director in the New Jersey office of HFF with more than seven years of experience in commercial real estate. He specializes in invest- ment sales in New Jer- sey, New York, Pennsyl- vania and Connecticut. Throughout the course of his career, Oliver has been involved in more than $2 billion of office, industrial, retail and multi-housing sales. n
s the multi-housing market continues to grab both national
the retail sector accounted for $83 billion in national trades in 2014, outpaced only by office ($119 billion) and multi-housing ($112 billion) investments. That being said, retail had the highest year-over-year (YOY) increase in investment activ- ity in 2014, with a 31.3% in- crease over 2013. Office had a 14.6% YOY increase while multi-housing only had an 8.9% YOY increase. The New Jersey market has seen a similar trend in retail investment. Accord- ing to RCA, the State saw
and region- al headlines with endless new supply a n d p o s i - tive demand drivers, re- su l t i ng i n suppressed c a p r a t e s
Michael Oliver
and record pricing, many in- vestors have shifted their fo- cus into other real estate as- set classes. According to Real Capital Analytics (RCA),
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