EAST RUTHERFORD, NJ-Though certain statistics trail national averages, New Jersey’s fundamentals continue to improve, setting the state up for a full comeback by 2015, said speakers from Cushman & Wakefield at a special webinar focus on the year ahead.
While unemployment remains above the national average, real estate remains poised for a recovery in the year ahead. “Last year was an interesting one,” says Gualberto Medina, executive managing director of C&W of New Jersey. “We faced a lot of significant hurdles in terms of the economy.”
The European debt crisis, among other factors, made businesses more cautious, particularly in the second half. Safety was a major factor for investors in the office market, said Andrew Merin, vice chairman, Capital Markets Group of C&W.
“With all of the chaos in the second half of the year, people were looking for safety in their investments,” Merin said. A great deal of product was brought to the market in the first half, and by the second, investors had made their decisions or were frightened off.
In 2010, 31 buildings were sold for a total of $1.3 billion, Merin said. Last year, only 14 buildings were sold in the state, but the total value was nearly $1.5 billion.
Layoffs are declining, and corporate profits are at record highs, which should lead to declining unemployment. At 9.0%, New Jersey’s rate is higher than the national average of 8.5%. The state lost 200,000 jobs during the recession, 117,000 of them in 2009 alone, Medina noted, on top of underperformance in the years prior.
Over the past 20 years, the economy has shifted dramatically away from manufacturing and toward professional services. The result was a virtual “lost decade” from 2000 to 2010, where the state saw no growth in jobs, and thus office occupancy.
“We ended the decade with fewer than at the beginning,” the first time this has happened since records have been kept, Medina said.
However, with little to no new construction, fundamentals are slowing improving.
“New Jersey pretty much mirrored the U.S. in terms of job loss. However, the recovery is much more sluggish,” said Ken McCarthy, managing director, New York Area Research. “New Jersey has yet to enter a full-fledged recovery.”
That is reflected in office vacancy, which rose 0.6 percentage points in the Northern New Jersey last year to 17.9%, but dropped 1.4 percentage points to 19.8% in Central New Jersey. “We expect vacancy rates to continue to fall as employment picks up,” McCarthy said.
On the industrial side, increased activity should see existing spaces continue to be filled, which should draw investment. “A lot of capital was underinvested in industrial,” Merin said.
Uncertainty will linger for the next six to 12 months as Europe’s crises remain unresolved, and budget deficits remain a challenge in the United States. “The underlying fundamentals are still healthy, but they won’t accelerate until we know what the situation will be,” McCarthy said.
But New Jersey has an advantage over other states – its proximity to the economic engine of New York City. “New Jersey will manifest strong signs of growth in the next couple of years,” Medina said. “There is still significant wealth in New Jersey. Population matters and density matters.”
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.