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Real Estate Bisnow
The largest commercial real estate publication in the United States.
   
January 4, 2012 
 
 
 
2012: THE PREDICTIONS

 
What does the new year hold for NJ real estate? Considering we predicted the Iowa caucuses would bring Herman Cainapalooza, we'll leave market prognostications to the Garden State's brightest minds.
 
OFFICE: Riding the Momentum
 
Cushman & Wakefield executive managing director Gil Medina
Cushman & Wakefield executive managing director Gil Medina tells us he’s “encouraged and optimistic” for the office sector for this year—and November’s addition of 10,000 private sector jobs allowed the state to end ‘11 with the best annual job performance since 2000. This, along with the state’s strong geographic and demographic profile, provides momentum for ‘12, he says. While our CRE market is viewed as a submarket of either New York or Philly, it’s major in its own right, he says; the fourth-largest office market in the US is outranked in size only by Midtown Manhattan, Chicago, and Houston. Expect vacancy rates to ease down, rents to tick up, and more positive absorption throughout the state.
INVESTMENT: Here Come the Deals
 
HFF senior managing director Jose Cruz
HFF senior managing director Jose Cruz (at Bisnow’s Future of NJ Urban Centers event last April with a full complement of water bottles cheering him on) sees sales volume picking up heading into January with several new deals on the way and six sales ready to close in the new year. (Last year, he and his partners closed $1.3B in the New York metro, including the $242M, six-property AIG multifamily portfolio sale.) This year will see the continuation of capital flows from the private REITs to institutional funds. We’ve also seen new entrants into the NJ multifamily market. “I’m bullish, given that 2011 was active despite the economic ups and downs,” he tells us. Pricing will stay strong in most sectors—multifamily and urban office deals were hot in ‘11, while retail and industrial sales will see greater activity in ‘12. Interest rates won’t be moving up in a meaningful way any time soon, and the debt markets will continue to support the equity players assuming the economy holds.
RETAIL: Filling Up Quickly
 
The Goldstein Group president Chuck Lanyard
If the ICSC New York National Conference last month was any indication, ‘12 is going to be a much better year for NJ’s retail market, says The Goldstein Group prez Chuck Lanyard. From national tenants seeking Class-A space and mom-and-pops taking advantage of lower rental rates (down 20% from three years ago), his firm is quite busy filling some of those empty spaces. “Good spaces are getting gobbled up and big boxes are leasing up aggressively,” he tells us. The state’s overall vacancy rate is 8%, compared to the national average of 12% to 15%; we’re nearly back to a pre-recession pace, he says. Activity is particularly picking up in urban areas, which took a major hit in the downturn.
INDUSTRIAL: Don't Miss the Opportunity
 

Jones Lang LaSalle managing director David Knee

NJ’s industrial market is finally bottoming out—and if we continue to see the flurry of activity Q4 experienced, particularly in the Meadowlands, ‘12 will be a good year, says JLL managing director David Knee. Submarkets around the ports also held up well, thanks to virtually no new construction. And there are so few large blocks of space in Central Jersey that we’re beginning to see some spec development. This year will be a neutral tenant-landlord market, but landlords will see a nod in their direction by next year. ”The worst is certainly behind us, and the window is closing for advantageous deals,” he tells us.
HOSPITALITY: Thanks for the Biz, Manhattan
 
LW Hospitality Advisors president & CEO Dan Lesser
All of NYC’s suburban markets, including New Jersey, will continue to generate hotel room demand, thanks to the strength of Manhattan’s hospitality market, says LW Hospitality Advisors prez & CEO Dan Lesser. Manhattan is currently experiencing occupancy rates in the mid-‘80s (nationally, it’s only 60%) and plenty of sell-out nights, pushing people to look at outlying areas. Hotels around Newark Liberty International Airport and in the urban downtowns are particularly busy, and we should see an upward pressure on rates and occupancy levels this year, he says.
MULTIFAMILY: Rentals Still Undersupplied
 
AvalonBay SVP of development Ron Ladell
Expect more multifamily construction this year, says AvalonBay SVP of development Ron Ladell (snapped at Bisnow’s NJ Multifamily Summit in September). Even with the increase we’ve seen in development, New Jersey is still undersupplied on the rental side. But we’ll see some new players, particularly companies that have never developed multifamily before. Many of these will be partnerships with existing developers or other indirect involvement. “But they have to understand that building and operating multifamily is much different than office or retail—they’ll be surprised,” he warns. Ron tells us AvalonBay will be launching new projects and brands in ‘12 and ‘13, adding to the 4,800 units and 13 communities it already operates in the state.
 
CONSTRUCTION: More Housing on Horizon
 
Advance Realty Development COO Kevin Tartaglione
And multifamily rental projects will dominate the overall construction and development industry this year, particularly urban, mixed-use projects near transit, says Advance Realty Development COO Kevin Tartaglione, whose firm is currently building Riverbend District in Harrison and Willow14 in Hoboken. Most projects that start this year will continue to be more of the same, he says. In the suburbs, we’ll see one-off construction in other sectors, but most projects that start will be residential rentals. For-sale residential won’t see much momentum, and any such projects we see built will be less on spec and more dependent on pre-sales. Although contractors are busier, there are still plenty available for projects, and construction prices will see an insignificant increase, keeping project costs relatively flat.
 
LOOK INTO OUR CRYSTAL BALL
 
Fortune Teller
Cartoon: Gaspirtz.com
Do you work in Hoboken, Jersey City, and Newark? Bisnow’s gathered even more experts to give you their outlooks on some of NJ’s hottest markets at our Northern Jersey State of the Market Breakfast & Schmooze Jan. 18 at The Newark Club. Hear from Onyx Equities co-founder Jonathan Schultz, Matrix Development Corp president & CEO Joseph Taylor, Roseland Property Co partner Carl Goldberg, Russo Development president & COO Ed Russo, Heller Industrial Parks president Jeff Milanaik, and Cole Schotz’s Christopher Caslin. More speakers to be announced. Seats are limited—sign up here!
 
Our readers pocket-dialed us twice over the holiday break. Perhaps Amanda Marsh should change her first name to something with a Z to avoid that awkward “first in phone” position. Zelda? Zahara? Zsa-Zsa? Send your suggestions and story ideas to amanda@bisnow.com.
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