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Mixed message from real estate as uneven recovery continues

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New Jersey's commercial real estate market continues to have a mixed recovery, as major gains in some sectors are being tempered by slow growth in others, a panel of developers said today.

The panelists, speaking at the annual RealShare NJ conference in New Brunswick, told an increasingly familiar story that includes a thriving multifamily market, a healthy industrial sector and an office market stymied by the state's tepid job growth.

"The multifamily rental industry continues to be white hot. There's no other way to describe it," said Carl J. Goldberg, managing partner of Roseland Property Co., citing high rents and a surge in new apartment construction around the state. He later added, "The question that we now ask ourselves is: 'Is it sustainable?'"

Goldberg said the answer to the question "is not completely understood yet, but there are certain trends that would suggest there is, in fact, a fundamental shift in the way people live." He pointed to decreasing rates of home ownership, difficulties in obtaining mortgages and the appeal of multifamily amenities in areas near mass transportation.

That type of widespread success is absent from the office market, said George Sowa, executive vice president and senior managing director of Brandywine Realty Trust. Statewide activity has been inconsistent from last year to this year — largely because of meager job gains — and only a few submarkets, like Princeton and the so-called Gold Coast, have done well, he said.

"The old adage in real estate of location, location, location is being replaced these days in office by jobs, jobs, jobs," Sowa said, noting that the state lost 250,000 jobs from February 2008 to February 2010. "It's really critical … to continue to have jobs be created, so that we can actually fill some of this space that we have."

The industrial market, meanwhile, has had "steady, consistent activity" since last year, said Emanuel Stern, president and chief operating officer of Hartz Mountain. He said 2011 was a banner year for industrial leasing for the Secaucus-based firm, due to pent-up demand from 2009 and 2010, and that 2012 "is a year in equilibrium."

The panel was moderated by Caren Franzini, CEO of the state's Economic Development Authority, who will step down this month. The discussion included everything from zoning changes to capital markets to the upcoming presidential election.

The three panelists differed on whether national politics would impact New Jersey's commercial real estate market. Sowa said some market players may be using the election as an excuse to not make real estate decisions. But he also noted that some of the state's industries — like the defense sector in central and southern New Jersey — are truly affected by uncertainty over federal spending and looming budget cuts.

"It's an unclear business environment right now," he said. "And if people don't have a burning need — a lease expiration or some need to actually have more space — it seems like people are looking for reasons not to do it, rather than do it in a lot of cases."

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