C — July 26 - August 15, 2013 — Brokerage Directory — Mid Atlantic Real Estate Journal
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B rokerage D irectory
By Ryan Nee, Marcus & Millichap Real Estate Investments Northern New Jersey investment market
S
table job gains across the Northern New Jer- sey region are support-
are keen on the region’s local properties due to the area’s strengthening economy, high income households, and prox- imity to Manhattan. At the end of 2012, sales velocity ac- celerated as investors rushed to close deals prior to an in- crease in capital gains taxes. At that time, buyers were more likely to meet sellers’ high price expectations due to the low interest rates. Since the beginning of the year, trading across the board has slowed as owners hold on to their as- sets to benefit from healthy operations and avoid allocating 1031-capital in a low-avail-
ability environment. Buyers, meanwhile, are becoming more cautious and re-evaluating the asset prices due to uncertainty surrounding the future of in- terest rates. Investors seeking apartment assets remain motivated and the gap between buyer and seller expectations has nar- rowed, resulting in transac- tion velocity to tick up about 4 percent over the past year, with the majority of deals oc- curring in Hudson and Union counties. The median price per unit declined by 7 percent to $81,000 per unit, as older and smaller properties were traded
compared with the previous time period. In the transac- tions recorded over the past year, the average cap rate was in the low- to mid-7 percent range, though several well-lo- cated properties traded below a 5 percent cap rate. Bergen and Morris county assets changed hands with the lowest cap rates, averaging in the low-5 percent range. Transaction activity will remain robust through the remainder of the year. However, the rising rate on 10-year U.S. Treasury will likely put pressure on interest rates in the coming months. This could impact price expec-
tations, widening the buyer and seller gap. On the retail front, financing for construction of multi-ten- ant properties remains chal- lenging for many prospective borrowers, and lenders contin- ue to clearly favor established and reliable retailers in single- tenant formats. A surge in de- mand for Northern New Jersey retail properties will create a competitive bidding environ- ment for properties that come to market this year. These investors are targeting single- tenant assets, particularly properties that are secured under long corporate-backed leases, as an alternative in- vestment to typically lower- yielding bonds or stocks. How- ever, limited new construction in recent quarters has reduced the number of listings of these desired properties. As a result, buyers seeking to place capital while interest rates remain low are encouraged to move down the quality scale or into the multi-tenant arena. Locally, single-tenant cap rates can dip below 6 percent in some instances, and most properties will change hands below 8 per- cent. Multi-tenant strips that are nearly full and in high-traf- fic areas exchange in the low- to high-7 percent range. Office investors will remain bullish on Class B/C assets this year. Owners who bought during the height of the mar- ket are facing a few hurdles when bringing the property to market. Specifically, sellers seeking to capture prices based on pre-recession rents will be disappointed as banks under- write deals based on current market rents. A few operators will turn to private capital for recapitalization, while those who must divest will be forced to sell at a discount to avoid a potential default. Opportu- nistic buyers will move off the sidelines and target lower- to mid-tier properties near major highways, and perform major renovations to attract tenants and boost rent rolls. Overall, cap rates averaged in the high-7 percent range through the past 12 months. The best- in-class properties in Northern New Jersey traded just above 7.5 percent cap rate, while class B properties were slight higher just over 8 percent cap rate. RyanNee is regional man- ager at Marcus &Millichap Real Estate Investments in New Jersey. n
ing healthy c o n s u m e r spending and h o u s e h o l d f o rma t i on , trends that will persist in the com- ing months. O v e r a l l ,
Ryan Nee
most employment sectors add- ed jobs in the first six months of the year, and local payrolls have increased in four of the past five quarters. Investors throughout the tri-state area
EXPERTISE LOCALLY, TRUSTED NATIONALLY Making a Market from Wall Street to Main Street BELOW IS A SAMPLING OF OUR CURRENT EXCLUSIVE LISTINGS
Cobleskill, NY 50 Units
Hackensack, NJ 40 Units
Glen Rock, NJ Office
Rockaway NJ 41 Units
Jersey City, NJ 20 Units
Jersey City, NJ 17 Units
Deal, NJ Single Tenant Lease
Westwood, NJ Single Tenant Lease
To Access the Investment Market, Contact the Market Leader Ryan Nee
Regional Manager New Jersey Office (201) 582-1000 ryan.nee@marcusmillichap.com
Offices Nationwide
www.marcusmillichap.com
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