Throughout the past year, Lee & Associates, NJ, has monitored New Jersey’s commercial real estate market. Here, Elmwood Park-based company announces the seven most significant commercial real estate stories in Northern New Jersey in 2014:
Port Newark Container Terminal (PNCT), Port Newark-Elizabeth: One of largest stories this year focuses on the prime water real estate in Newark bordering Elizabeth.
Officials at PNCT are in the process of expanding and restructuring this strategic port, doubling the number of containers moving through the Terminal, creating more warehousing opportunities and commerce throughout New Jersey. With the new port rephrase supporting more than $36 billion in annual business income, New Jersey will continue to offer the largest concentration of warehouse and distribution space in the United States.
This restructuring will dramatically impact the entire state of New Jersey and add significantly to economic growth.
State Steps In: The State of New Jersey is stepping in to assist with things moving forward, as well. Grow New Jersey was an initiative created to attract business to the state by offering businesses up to 10 years of tax credits for job creation.
It was launched, in part, to counter similar efforts in New York, Pennsylvania and Connecticut. The program attracted a number of businesses to New Jersey in 2014, including Wenner Bread Products of Long Island, NY, which leased 301,600 square feet in New Brunswick. Wenner was represented by Lee & Associates.
Sluggish Employment Growth: Despite the state’s Grow New Jersey program, the slow employment growth rate has been a stubborn issue for Northern and Central New Jersey’s office market.
In fact, a lack of good quality jobs has kept the high vacancy rate in the 14% range through Quarter 3 in 2014.
The market has witnessed companies moving in and out of existing spaces throughout the region.
After the movement, which can be likened to a “game of musical chairs,” the vacancy needle moved a small 50 basis points since the end of last year.
Despite the lack luster market, there are some examples of business growth throughout the state, including the expansion of the law firm of Kozrya & Hartz, represented in relocation efforts by Michael Staskiewicz, Senior Vice President of Lee & Associates.
Shift in Workforce Environment Preferences: A big cause of the issue is the shift in workplace demographics.
In 2014, Millennials finally outnumber Baby Boomers in the workplace, and they have their own ideas about what makes a desirable work environment.
Urban areas typically offer the three things millennials crave: a 24/7 lifestyle, amenities and easy access to public transportation hubs. As a result, high quality office buildings near urban centers are active in all building classes.
Suburban property owners are working to add Millennial-friendly improvements that allow workers to work, socialize and relax in a more open atmosphere.
Ecommerce: Driving a significant portion of the big box market, e-commerce has motivated developers to get new product off the ground to meet that demand.
On the positive note, in the third quarter, 3.6 million square feet of new inventory was delivered to the market, more than the total for the first two quarters of 2014 combined.
Market Progress: The Northern New Jersey industrial market is improving and the levels are in line with other major metro areas. With declining vacancy, positive net absorption, increasing rents and development activity, this region shows promise. The third quarter 2014 ended with an 8.3% vacancy rate, down 10 basis points for the third straight quarter.
Rates: By Quarter 3, the average asking rental rate for office space stood at $23.59 across all categories. In Q3, class A came in at $27.26, class B at $21.48 and class C settled at $19.21,and little changed as compared the previous quarter. There have been several significant build to suit transactions completed this year, including new facilities for Prudential and Panasonic.