An economic slowdown and the rise of a range of market disruptors will impact the commercial real estate industry in 2019, according to speakers at NAIOP New Jersey’s Annual Meeting and Commercial Real Estate Outlook.
Over 325 industry professionals attended the event Jan. 24 at the Short Hills Hilton, which included the election of the commercial real estate development association’s 2019 officers and trustees.
Alexander Heil, chief economist for the Port Authority of New York and New Jersey, provided an overview of the economic outlook for 2019. “2018 was a great year,” said Heil, citing highlights that included a strong GDP due to consumer spending and solid employment growth nationally and regionally.
However, key areas of concern included minimal wage growth, a decline in labor force participation and stock market volatility that dominated the second half of the year. “In 62 trading days, we saw a total decline of 19.6 percent and 25 days with a one percent change or more. By comparison, in 2017 there were zero days.”
Heil noted that the prolonged government shutdown has already had negative consequences for the first quarter of this year. “As of now, we can expect to see 0.52 percent lower growth for the quarter as a result.”
In 2019, he expects a slowdown in economic growth nationally and regionally. “Last year the economy had plenty of support from the fiscal side, but we see this diminishing in 2019 and 2020.”
Although the Amazon HQ2 RFP process was a disruptive force in New Jersey, a panel of industry experts and local economic development leaders agreed that it was just one of the major disruptors impacting the commercial real estate industry. Citing factors ranging from automation and co-working to ridesharing, panel moderator Tim Lizura, senior vice president of real estate and capital projects for the New Jersey Performing Arts Center, said, “Ultimately, the disruptor is personal choice, and it’s changing the real estate industry.”
The panel also examined how the changing demands of office users have disrupted commercial real estate. “Co-working has been a big factor,” said Avi Orlansky, CEO of PrimeWork, which offers short-term office space solutions in suburban markets. “Co-working started with the rise of entrepreneurship, but more recently the focus has been on small to midsized businesses that need facilities and amenities, but don’t want to sign long-term contracts.”
Larger companies looking to create workplace efficiencies are also considering co-working spaces, which means providers need to ensure their buildings offer the dynamic features that attract corporate users.
The question of whether or not ridesharing models (Uber, Lyft, etc.) are a disruptor drew a mixed response from panelists. Shearer commented that employees in Rockefeller Group’s office buildings typically use public transportation or drive their own cars, but Orlansky said that while PrimeWork’s buildings offer ample parking, “We do have a fair amount of people embracing the ridesharing concept, particularly where public transportation is not within walking distance.”