SIOR predicts continuing improvement in NJ markets

Real Estate Weekly, Feb 18, 1998

The Society of Industrial and Office Realtors - New Jersey Chapter (SIOR-NJ) has reported that demand for industrial space in New Jersey has shown continual improvement since the uptrend started in the summer of 1993. Office building vacancies have also shown a remarkable decline in all areas.

This substantial trend of improvement is anticipated to continue through 1998 due to continued economic expansion within New Jersey, although at a more restrained pace, SIOR-NJ officials predict. New construction has begun to accelerate where vacant land is available and is expected to continue, also restrained, due to space shortages developing, they added.

SIOR-NJ Chapter President Frank Clancey, senior vice president of George Mintz & Co., Inc., moderated the annual press conference held January 21st at the High-lawn Pavilion Restaurant in West Orange, NJ, to debut the Society's 1998 national market guide entitled "Comparative Statistics of Industrial and Office Real Estate Markets," published jointly with Landauer Associates.

The guide gives a comprehensive analysis of industrial and office space activity in 1997 for more than 136 market areas in the USA, Canada and Mexico, and a forecast for 1998. The report shows that office markets of the United States are boasting a robust recovery as the economy rebounds, and consumer confidence stands at an all-time high since 1969.

Values, Construction Up Nationally

Vacancies for 1997 in the USA were posted at 9.6 percent of the 3.5 billion square feet of office space, with substantial new construction and renewed interest in downtown areas. Industrial vacancy remained the same as last year, 7.1 percent of the total 10.5 billion square feet, although values increased and new construction was 24 percent higher than the previous year.

New Jersey Market Conditions

The overall vacancy in New Jersey at the end of 1997 was 6 percent for industrial, vs. 8.2 percent last year, and 10.6 percent for office vs. 16 percent last year. These compare to a nationwide 7.1 percent for industrial and 9.6 percent for office. The importance of the New Jersey markets was stressed, as the Garden State has more than 10 percent of the nation's industrial inventory and 4.3 percent of the office total.

Industrials Continue Improvement

David T. Houston, Jr., SIOR, president of Colliers Houston & Co. of Teaneck, said that in the Northern New Jersey industrial market, consisting mostly of older space with little land for new construction, vacancies declined to 5.6 percent, a drop of 2 percentage points from 1996, "but the future is not expected to be as robust as the past two years." Manufacturing continues its slow decline and the trend to rehab or demolish older facilities continues especially into retail uses. Nearly 31 million square feet remains vacant, down six million square feet from 1996, and rents and sale prices continue to creep up. Houston stressed the importance that funds are finally available to complete the dredging of the Port Newark area harbors, which are critical to many industries and jobs in New Jersey.

Noting that New Jersey is near full employment, Houston said absorption gains must come from higher productivity, not more jobs. The light rail transit system proposed to connect New Jersey and New York City will not only deliver New Jersey residents into New York, but also bring New Yorkers, suffering much higher unemployment, to the jobs in New Jersey and ease the state's developing labor shortage, Houston said.

John Horan, SIOR, of Feist & Feist Realty Corp., said industrial space in Central Jersey showed a 7.1 percent vacancy rate, with 19 million square feet available. A total of 3.5 million square feet is now under construction, mostly near Turnpike Exit 8A, and demand should continue to increase in 1998, forcing prices 10 percent higher. Central New Jersey includes Mercer, Monmouth, Somerset, Union, Morris and Middlesex counties.

Jeffrey Licht, SIOR, from the Mertz Corporation of Mt. Laurel, noted Southern New Jersey industrial vacancy increased slightly, up to 4.6 percent from the previous year's 4 percent, but this statistic does not reveal the success of the area during 1997, when 1.7 million square feet was absorbed, double the rate of 1996. The area benefitted from firms leaving the aging Philadelphia market, Licht said, adding "Not only did new industry locate in this area, but they brought their friends."

More than 2.1 million square feet is planned to rise in 1998, with more than 80 percent devoted to warehouse and distribution buildings.

Offices Show Sharp Advance

Vic LaGreca, senior vice President of Feist & Feist Realty Corp. of Roseland, said "1997 was a bit of heaven," with Northern New Jersey vacancy dropping to 11.8 percent, sharply down from the 17 percent vacancy in 1996 and the 23 percent in 1995. A total of 11.2 million square feet remains vacant in Northern New Jersey out of an 86 million square-foot inventory. Class A buildings dropped from 13 to 9.2 percent vacancy, and Class B buildings from 20 to 13 percent. Class B buildings accounted for 75 percent of all the deals, largely due to a lack of Class A alternatives. Even major buildings in Newark have recently changed hands and will undergo extensive renovations to bring them into the 1990's marketplace. On the planning boards is 3.5 million square feet, with one million square feet expected to be delivered in 1998.