2012 Global Market report - NAI Global

Middlesex/Somerset Counties, New Jersey
Northern New Jersey
Contact
NAI DiLeo-Bram & Co.
+1 732 985 3000
Metropolitan Area
Economic Overview
2011
Population
2016 Estimated
Population
Employment
Population
Household
Average Income
Median
Household Income
Total Population
Median Age
1,146,121
1,200,105
609,909
$117,118
$89,718
38
The central New Jersey real estate market still remains
challenged as 2011 comes to a close, however there are
positive indications that the worst is behind. The most
positive sign comes from the industrial sector as it continues
to stabilize with positive net absorption throughout
the region. The retail sector has shown signs of increased
activity among national, regional and local tenants. The
office market, the sector most directly affected by
unemployment, remains stagnant.
The industrial market is ending the year on the upswing.
Vacancy rates continue to decline from 10.6% at the
beginning of the year to 9.6%. While it is still a tenant’s
market, the fundamentals indicate a more favorable vision
of the future. The gap between what tenants are willing to
pay and what landlords will accept is closing. The “panic”
deals of the past 24 months are gone. Landlords are still
giving concessions of free rent and Tenant Improvement
Allowances, however the trend indicates that more tenants
are willing to relocate for the right deal and commit to longer
terms.
In the retail sector, rents have stabilized at 30% less than
the peaks of 2007 and vacancy rates are at 10%. There
is still a healthy amount of national and regional chains
seeking locations, especially in the food services industry.
A majority of the leases are with tenants taking spaces of
20,000 SF or less, many of them independent or franchised
chains. Any type of spec building in the retail sector
is non-existent. The Route 18 retail corridor, considered
one of the best retail markets in the region, is reporting
vacancy rates of 18% which is above the general market
vacancy rate.
The office market remains the most problematic. In the
last four quarters, vacancy rates have risen to 23%. It will
take years, if ever, before this sector will see significant
absorption of space. Large blocks of vacant corporate
spaces still remain, creating challenges for owners to divide
into smaller units. Steady job growth will be the ultimate key
to any real positive turnaround or achieving any significant
stabilization in this sector.
Contact
NAI James E. Hanson
+1 201 488 5800
Metropolitan Area
Economic Overview
2011
Population
2016 Estimated
Population
Employment
Population
Household
Average Income
Median
Household Income
Total Population
Median Age
4,845,976
5,047,261
2,543,777
$98,350
$73,841
37
The Northern New Jersey marketplace continues to be
extremely active. Our market is closely tied to the national
economy. Northern New Jersey boasts one of the largest
and most diverse commercial real estate markets in the
country. Insurance, financial, pharmaceutical, telecom,
manufacturing, retail and international companies are the
backbone of our marketplace.
The industrial sector remains active. Modern facilities are
in demand with growth in the international import/export
businesses. Less modern buildings aggressively compete
for deals. Demand for flex/R&D is vibrant with older buildings
being converted to data centers. The build-to-suit market
has returned. Notable transactions include Kenco leasing
500,000 SF, Wakefern Foods and Goya Foods constructing
over 1,050,000 SF and 600,000 SF respectively and I/O
Communication leasing 830,000 SF as a data center.
Overall vacancies stand at 9.0% to 9.5%.
The office market is brisk. The Waterfront (Jersey City,
Hoboken and Weehawken) has strong growth while
suburban locations struggle. Overall vacancies have been
falling and currently stand at 14.5%. Notable transactions
include Novo Nordisk leasing 770,000 SF in Princeton,
Atlantic Health 190,000 SF in Morristown, Fidelity and
Merrill Lynch 180,000 SF and 250,000 SF respectively in
Jersey City with a lease renewal of 1,000,000 SF plus by
UBS in Weehawken. The NJ office market is great for
companies seeking to upgrade space.
Our retail sector has been slow to recover. Retailers are
cautious to open new stores while others vacate. Vacancies
have leveled to 6.5%. Malls continue to do well while
downtown locations suffer. There is minimal new construction
throughout our market.
Investors have an insatiable appetite for core assets and are
looking at all opportunities that fit their portfolios. Multifamily
and industrial remain most active. Cap rates can break 5%
for A+ multifamily properties and 6.5% to 7.5% for core
institutional properties. With borrowing rates at historic lows,
we see this continuing throughout the year.
Overall, there is reason to be optimistic about the New
Jersey real estate market as it remains a strategic location
to do business. Economic growth locally and nationally will
be crucial for any sustained recovery.
Middlesex/Somerset Counties At A Glance
(Rent/SF/YR) low High effective avg. Vacancy
doWntoWn offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
suburban offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
IndustrIal
$
$
$
N/A
N/A
N/A
22.00
17.00
12.00
N/A
N/A
N/A
$ 28.00
$ 24.00
$ 16.00
N/A
N/A
N/A
$ 23.00
$ 19.00
$ 14.00
N/A
N/A
N/A
20.00%
21.00%
30.00%
Bulk Warehouse
Manufacturing
High Tech/R&D
retaIl
$
$
$
2.50
2.50
5.00
$
$
$
6.00
6.00
9.00
$
$
$
4.00
4.00
7.00
9.60%
9.60%
9.60%
Downtown
Neighborhood Service Centers
Community Power Center
Regional Malls
$
$
$
$
16.00
12.00
17.00
40.00
$ 25.00
$ 22.00
$ 24.00
$ 80.00
$ 20.00
$ 17.00
$ 19.00
$ 50.00
10.00%
10.00%
13.00%
8.00%
deVeloPment land Low/Acre High/Acre
Office in CBD
Land in Office Parks
Land in Industrial Parks
Office/Industrial Land - Non-park
Retail/Commercial Land
Residential
$
$
$
$
$
N/A
200,000.00
200,000.00
100,000.00
250,000.00
50,000.00
$
$
$
$
$
N/A
400,000.00
300,000.00
300,000.00
900,000.00
150,000.00
Northern New Jersey At A Glance
(Rent/SF/YR) low High effective avg. Vacancy
doWntoWn offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
suburban offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
IndustrIal
$
$
$
$
$
$
33.00
22.00
14.00
28.00
21.00
14.00
$ 44.00
$ 35.00
$ 21.50
$ 36.00
$ 35.00
$ 22.00
$ 35.00
$ 27.50
$ 17.00
$ 30.00
$ 28.00
$ 19.00
5.00%
13.50%
16.50%
35.00%
12.50%
15.00%
Bulk Warehouse
Manufacturing
$
$
2.75
3.00
$
$
6.00
5.50
$
$
4.75
4.25
9.00%
8.00%
High Tech/R&D
retaIl
$ 6.50 $ 13.00 $ 9.50 7.50%
Downtown
Neighborhood Service Centers
Community Power Center
Regional Malls
$
$
$
$
15.00
14.00
14.00
25.00
$ 40.00
$ 25.00
$ 25.00
$ 50.00
$ 25.00
$ 19.00
$ 20.00
$ 42.00
9.50%
13.00%
7.00%
2.00%
deVeloPment land Low/Acre High/Acre
Office in CBD
Land in Office Parks
Land in Industrial Parks
Office/Industrial Land - Non-park
$
$
$
N/A
100,000.00
60,000.00
75,000.00
$
$
$
N/A
350,000.00
350,000.00
300,000.00
Retail/Commercial Land
$ 150,000.00 $ 1,000,000.00
Residential
$ 40,000.00 $ 400,000.00
2012 Global Market Report n www.naiglobal.com 115