"There are peaks and valleys," says Paul Cohen, executive vice president of SBWE Inc. This has become a refrain in the industry when discussing the carnage on Wall Street. SBWE focuses on the industrial sector and Cohen says, "Industrial has made it through major recessions in the past and I don't think now we're going to see people turning buildings back to banks like the last recession."
He does say he's seeing more sublets. "In areas such as central and northern New Jersey, more sublet space is becoming available. For example, near New Jersey Turnpike Exit 8A, there are two million sf under construction that was planned during the pent up market," but with current conditions, this could add significantly to availabilities.
While he says there are not a lot of manufacturers left in the region, and it's "too soon to tell" the full impact of the economy on manufacturing, reports indicate that this sector is responsible for some of the highest numbers of layoffs recently. "When there are layoffs, you don't always know how far it will go. When you don't have people, though, it's pretty safe to say you don't need space."
He says real estate brokers "can be busy in a slowdown" because some space seekers look when the prices come down. He jokes, "I follow the market relative to my pension plan, but that's about it." He adds, "So far I haven't had anyone call to say they're no longer looking for space, but it is a little more quiet than I would like it to be."
Kenneth Levien of Levien and Co. Inc says his clients are becoming cautious with the wild ride on Wall Street. "The impact on commercial real estate is almost immediate," he says pointing particularly to office space. He notes he's already seeing an increased sell-off of properties. "When the crash hit in 1987, I didn't start feeling it until 1989 and 1990 and 1991 were just horrendous. There is a lag, but we're seeing the effects on the real estate market now tracking pretty closely with the economic shifts."
While neither expert interviewed for this story wanted to make too far-reaching predictions, they did share some insight into what they believe may prove true in the coming months. Levien says multifamily will continue to do well in this city because there is such a tremendous shortage of available housing. More conversions of space into housing may occur he notes as space becomes available and office users aren't grabbing them as quickly as before. Cohen predicts that brownfield remediation will continue to grow and this kind of redevelopment could actually be fueled to some extent by a recession. As companies do need space, but are unable to raise the capital to fund new projects, brownfields become much more attractive properties.
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