NJ Real Estate Execs Are Watching These Top Trends In 2017
As New Jersey rings in 2017, commercial real estate is poised for another year of strong activity. We asked executives what top three trends will impact their business after the ball drops. Here's what they're watching:
Eugene Diaz, Principal Partner, Prism Capital Partners
Rising Interest Rates: Since the election, the 10-year Treasury rate has risen by more than 150% and Libor has increased more than 125%. Everyone has to adjust to new and increasing borrowing costs, Eugene says.
Tepid Suburban Job Growth: "There’s not much of a change here, but the possibility exists that a Trump presidency reduces regulation and repatriates significant overseas corporate profits, and the US economy kicks into higher gear later in the year," he says. "This should hopefully provide increased job growth and additional office employment, making the office market look somewhat more attractive."
Significant Increase In Stock Market: This should cause additional allocation to real estate as institutions adjust their asset allocations to meet preset targets, Eugene says. This means additional institutional investment in real estate, which could increase prices enough to offset the negative impact of increased borrowing costs.
Peter Bronsnick, SVP, SJP Properties
A Constrained Class-A Office Market: SJP believes this is going to fuel demand for new high-quality, build-to-suit construction and renovation, Peter says. The company, along with Matrix Development, just sold Two Riverfront Plaza in Newark to an entity advised by Arch Street Capital Advisors; the 338k SF, 12-story, LEED-certified office tower is fully leased on a long-term basis to Panasonic.
Continued Eye On Accessibility: We'll continue to see the migration of companies into transit-oriented locations with walkable amenities that provide direct access to the next-generation workforce. "This is helping to spur activity in urban centers and downtowns all along the train line," he says.
Growing Focus On Workplace Strategy: More companies are implementing workplace strategies that prioritize space efficiency and connectivity, which is generating a need for more modern office environments that enable densification and offer superior mechanical infrastructure, Peter says.
Steve Nislick, CFO, Hugo Neu Corp
Upticks In Startups And Small Business: Steve expects to see continued employment growth in North Jersey among small and startup businesses, a spinoff of activity coming out of NYC. "The sheer number of startups and small businesses in the city is growing at such a rapid pace that there is an increasing need for a workspace that is both highly affordable and turnkey," he noted. This is the philosophy driving the flex office spaces at Building 78, which anchors Hugo Neu's Kearny Point, a 130-acre industrial redevelopment of the historic Kearny shipyard in South Kearny. The building is already home to more than 70 businesses.
Greater Emphasis On Transit-Oriented Locations: "We anticipate that businesses will continue to place an emphasis on moving into—or back into—New Jersey's transit-oriented urban environments with proximity to New York City," he said. This factor will be critical to the continued success of Kearny Point, given its location just five miles from Manhattan.
Sustainability's More Prominent Role: Sustainability is a key consideration for professionals—and especially among the Millennial workforce—when selecting an office environment, Steve noted. Along similar lines, Millennials are also looking for workspaces that mirror the social ecosystems they experience in other parts of their lives, offering a strong sense of community and encouraging discovery and collaboration.
Jeff Hipschman, Senior Managing Director, CBRE
Continued Office Leasing Momentum: In 2016, the market saw the first three quarters record higher office leasing velocity than in all of 2015, Jeff points out. "We'll close out the year with the highest level of leasing activity since 2007, and we anticipate that this momentum will continue into 2017," he says.
The Impact Of Grow NJ: The Grow NJ Tax Assistance Program, which has awarded 215 companies a total of $4.1B since its inception, will continue to drive demand in New Jersey, especially in the Waterfront submarket. Additionally, the Route 287/78 interchange and Morristown markets will continue to see significant activity.
Industrial Construction's Upswing: Industrial construction activity continues to dominate headlines, with the market exhibiting historically high leasing velocity and the demand for modern warehouse product remaining strong, he says. An additional 6.5M SF will deliver to the market over the next year. Elevated demand, coupled with limited supply, will lead to continued tightening in 2017.
George Kimmerle, President, Kimmerle Group
Repositioning Existing Assets To Find New Relevance: Many property owners are reassessing existing assets, as well as launching acquisition and due diligence studies, with the goal of repositioning sites and buildings for new and/or alternative uses. Kimmerle Group examines these assets, their zoning status, and the range of achievable entitlements in order to expand and enhance them, George says. In many cases, it's led to redevelopment programs with larger municipal-wide implications for town revivals and expansions.
America’s Aging Population: There's increased demand for acute care, ambulatory care, skilled nursing and senior care. Additionally, individual healthcare systems are reassessing their needs, re-examining their on-campus facilities, and taking a larger look at how satellite ambulatory care sites benefit the whole when acting as feeders to a larger medical system.
The Millennial Generation: They're already impacting urban living as they move towards family formation. "We anticipate this will have a considerable impact on [private and public] urban schools, healthcare, housing and other related facilities," he said. Millennials will continue to redefine urban living across the country, he continued; Kimmerle's urban work—led by its New York City arm, Urban Studio—is directly engaged with its academic partners in envisioning these changes and the implications they can have on the industry.