According to panelist Jeffrey Dunne, a vice-chairman with CB Richard Ellis, there is money for deals in the market. Unlike the crisis in the '90s, when equity was lacking, there is plenty of equity in the market today. Most of the investment funds, however, are being cautious and are only taking on smaller deals or deals where there's existing debt in place.
[IMGCAP(2)]Arthur Stern, a founding partner and CEO of Cogswell Realty pointed out that the lack of clarity in the current market is making many companies reluctant to commit. "We've all been through tough cycles," he said. "What's missing from this cycle is clarity. Nobody knows where the market's going to go." He explained that the uncertainty was making sellers reluctant to sell property for the lower-than-last-year prices dictated by market conditions, tenants unwilling to sign new leases and lenders reluctant to hand out as much money as they would have a year or 18 months ago.
"The grease that makes the market run is debt, but right now debt is gone," said Dunne. "Everyone is nervous. Lenders are afraid for their jobs and are being scrutinized. They want more data before they proceed."
New Jersey has its share of challenges in this difficult market. "The office market has been tough," admitted David Welch, CFO of SJP Properties. "Government and taxation have made the state unfriendly. Businesses are reluctant to come in, and many people and businesses are leaving. The one bright spot is the Urban Transit Hub Tax Credit. That type of program helps attract businesses."
Resurging cities, such as Newark, are also enticing businesses to the state. In his luncheon keynote address, Mayor Corey Booker outlined the city's attributes.
"Newark is a city that is moving, it's pushing development," he said. He added that the city boasts major transport routes by water, rail, air and roads as well as a growing base of entertainment venues and cultural institutions that include the New Jersey Performing Arts Center and the Prudential Center. The City's explosive growth—according to Booker, Newark is the fastest growing city in the northeast—is causing a surge in demand for housing and services such as retail, and some companies are looking at the city as a more cost-effective alternative to Manhattan.
"We want to be known as a city that creates economic opportunity not just for its residents, but for the entire state," said Booker.
To reach its goals, Newark is fighting long-standing perceptions of the city as crime ridden and rundown. "We're fighting 40-plus years of perception," said Stern, whose company recently redeveloped 1180 Raymond Blvd. in the city, converting offices into rental apartments. "It's a very difficult battle, but the city has lots of attributes," he continued. "Leasing at Eleven80 is very good. The perception is changing."
When asked how long it would be before the market returned to normal, many panelists argued that it's closer to normal now than it has been in years. "I would argue that this is normal," said Stern. "You'll have cycles where at one point there's excess liquidity followed by a period of readjustment."
Welch said that "the last four years were an aberration. Debt was so cheap; you could get a lot of it. We're closer to normal levels now."
As with all cycles, what goes down must eventually go back up, and there is optimism in the real estate world. "We all love real estate here," said Paul Massey, co-founder and CEO of Massey Knakal Realty Services. "We loved it when things were great, and we love it now. We got through the 1990s. Right now, it's hunker down time."
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
