Though northern New Jersey is home to the third-largest industrial real estate market in the country, with 800 million square feet of industrial inventory, large units of available space have become increasingly scarce, and no investment sales have closed since October 2011, executives with Cushman & Wakefield said today.
“Folks have decided not to purchase less-than-class A industrial product, and we are running out of those large-block availabilities, so we may see more industrial development in the next few years,” said Gary Gabriel, executive vice president of Cushman & Wakefield’s capital markets group, during the firm’s commercial real estate review of the first quarter of 2012.
Gabriel said it’s a different story for the office real estate market along the Hudson waterfront, where vacancy for top-flight office space declined in the first quarter of 2012. But, he said, six transactions in the North Jersey office space market alone — four in Jersey City, one in the Meadowlands and one in Parsippany — represented 87 percent of the $1.5 billion investment sales volume in 2011. By the end of the year, Gabriel said, there may be $1 billion in investment sales, even though the per-square-foot sales price is currently $97 on average for the first quarter of 2012, while it was $259 on average in 2011.
Like the industrial market, Gabriel said “vanilla” suburban office buildings are “increasingly hard to sell in this environment, since investors want best-in-class product that’s not on the market in suburban areas.”
According to Cushman & Wakefield senior economist and senior managing director Ken McCarthy, while several companies are looking to move from suburban locations to cities to take advantage of the diverse labor market, that trend could reverse over the next three quarters of 2012, as per-square-foot sales prices increase along the Hudson waterfront and suburban office space pricing remains flat.
But with available class A office space lacking in the suburban North Jersey commercial real estate market, Gabriel said there will need to be more new construction, which he said isn’t likely to happen by the end of the year, given that financing for construction remains difficult to secure.