N.J. brokers look to industrial market for clues on growth

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Growth in New Jersey’s industrial real estate market could bode well for the state’s office sector in 2012, but gains in office activity may be held back by slow job creation in the coming year, two of the Garden State’s top brokers said.

Growth in New Jersey’s industrial real estate market could bode well for the state’s office sector in 2012, but gains in office activity may be held back by slow job creation in the coming year, two of the Garden State’s top brokers said.

An uptick in industrial real estate is historically among the “early indications that there’s market improvement out there,” Dan Loughlin, managing director of the real estate services firm Jones Lang LaSalle said. The state’s northern and central industrial markets through September saw more than 1.7 million square feet of positive absorption, driven mostly by Central Jersey, according to the firm’s third-quarter industrial outlook report.

“The industrial market is always a leader of the office market, which tells me that either commercial activity or consumerism has picked up,” Loughlin said.

David Opper, senior vice president at CBRE, agreed that growth in the industrial sector is a positive sign for commercial real estate, he said, but other factors in 2012 may cause the state’s office market to remain flat.

“Unfortunately, we’ll probably see a little bit more of the same because there aren’t necessarily any real growth drivers that I see,” Opper said. “And it’s an election year, so you get another reason for people to punt on decisions.”

Another trend — the shift by companies from sprawling office campuses to smaller, higher-quality spaces — could continue to pull the market in both directions in 2012, Opper said. He pointed to examples in 2011 such as Bayer HealthCare and Realogy Corp., both of which announced plans to relocate.

Loughlin also said employment growth would be a key to building momentum in the office sector, noting that suburban markets may be challenged by slow job creation. Office activity in 2011 has been stronger in urban markets such as the Hudson waterfront and Newark, he said, due in part to economic incentives, moves to be closer to mass transit and efforts to retain and recruit employees.

However, Loughlin said, growth in one suburban area – the Metropark office market in the Iselin section of Woodbridge – may be another positive trend. He described Metropark as another historical indicator, along with the industrial market, of future recovery in the office sector.

“When you look at Metropark, it’s always been the first market to recover and one of the last to fail,” Loughlin said. “There are certain markets in the state that for whatever reason generate more activity.”

Overall office leasing through September was up 37.1 percent from last year in the Parkway Corridor, which includes Metropark, according to a third-quarter Jones Lang LaSalle report on the state’s office market. While several large spaces went unfilled in the third quarter, Metropark benefited from several transactions such as an 81,000-square-foot lease by the clothing manufacturer Maidenform, and a 50,000-square-foot lease by financial services firm TIAA.

Opper, meanwhile, said that growth around Metropark is further evidence that “tenants are desiring new, more modern buildings.”