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Conference sparks talk of triumphs, challenges in New Jersey commercial real estate market

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It was around 9 a.m. at RealShare New Jersey, one of the year’s biggest commercial real estate conferences, and Joe Taylor had some friendly advice for the audience.

“If you’re not having fun in real estate right now,” said Taylor, president of Matrix Development Corp., “you ought to leave before lunch.”
 
It was a quip meant to drive home a key point: the state’s commercial real estate sector is thriving in 2014, led by continued booms in the industrial and multifamily markets and healthy strides in other sectors. That was the message of Taylor and other panelists who spoke Thursday at the annual event in New Brunswick, where hundreds of industry professionals gathered to hear from leading developers.
 
But those experts also said the industry is facing challenges, ranging from the prospect of oversupply and rising costs to public policy issues that remain unresolved.
 
Taylor, whose Monroe-based firm is preparing to start a 393-unit apartment project in New Brunswick, said “I can get a little schizophrenic” when it comes to whether the state’s surging multifamily market could become overbuilt in the coming years.
 
“On the one hand, I drive the waterfront up north and I think ‘How could this possibly be happening?’ ” he said, citing the thousands of units in the Gold Coast’s planning pipeline. “On the other hand, no matter what you read and no matter where you look around, it seems, in some ways, perfectly logical given what’s going on in New York.”
 
For commercial real estate as a whole, “the state overall is doing fairly well,” said Fred Schmidt, president and CEO of Coldwell Banker Commercial Affiliates. He cited a few exceptions such as office vacancy in central New Jersey, which has a rate of 21.7 percent as the market grapples with a glut of functionally obsolete properties.
 
But he noted that “across the country, supply has been gradually decreasing, demand has been increasing and rents have been stabilized across the board … and New Jersey’s numbers reflect that with vacancies overall.”
 
Schmidt added that “industrial has supplanted apartments as the No. 1 investment that people are looking for.”
 
Panelists said the market will hinge on the upkeep of the state’s infrastructure, which could present a challenge. Taylor said “we clearly have a looming crisis” when it comes to shortfalls in state funding sources for such projects. Indeed, administration officials and lawmakers in Trenton are now grappling with how to replenish a soon-to-be bankrupt Transportation Trust Fund.
 
“If you wanted to ask where the dark clouds are, clearly one of them is where the state’s going from a budget perspective and, more immediately, how that affects things like roads, bridges, tunnels, infrastructure improvements,” Taylor said. “It’s a major issue for us. We worry about it … So it is a competitive edge that we have now that’s not anywhere near the edge that we used to have.”
 
Speakers on two panels voiced concern about another key policy debate in New Jersey: affordable housing. The state’s guidelines for determining how municipalities should meet obligations for low- and moderate-income housing have been mired in controversy and litigation for years, leaving local governments with a sense of uncertainty that has stymied development projects.
 
Carl Goldberg, co-president of Mack-Cali Realty Corp.’s Roseland affiliate, said the state’s “inability to come to some sensible housing policy that deals intelligently with affordable housing could kill economic development in the state … and render the state noncompetitive with the states that surround us in the region.”
 
“Developers, investors and financial institutions demand predictability,” Goldberg said during a later panel. “Our inability to come to grips with the severity of this problem is chasing private investment away from the state of New Jersey at a time when we are desperately changing the perception that New Jersey is an unfriendly place to do business.”

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