FLORHAM PARK, NJ—The economy remains relatively stable overall, despite hurricanes battering the Texas coast, the change of administration and regulatory environment in Washington, say panelists on the “State of the Industry: An Outlook of New Jersey’s CRE & Capital Markets” panel at this year’s RealShare New Jersey conference, held Tuesday in Florham Park, NJ. Brian Whitmer, executive director, Cushman & Wakefield, moderated the panel.
“Commercial real estate has benefited. It’s somewhat the same report I could have given you four years ago, slow, steady, almost boring,” said Fred Schmidt, president and COO, Coldwell Banker Commercial. “But slow, steady, and boring is not a bad thing, so we’re seeing a relatively good economy.”
The interest rate environment is “somewhat benign,” Schmidt says. “I’ve been predicting upward pressure on interest rates and cap rates for the past four years, one of these days I’m going to get it right,” he says. “I think it bodes well for the commercial real estate environment.”
On the investment side of the equation, “there’s pricing discovery going on,” he says.
New Jersey’s ports are having “an exciting time,” says Ken Spahn, regional director, Ports and Intermodal, Dewberry, a private engineering and consulting firm. Storms, cyber attacks, technology issues, labor and infrastructure concerns all make port operations complex, particularly as the port opens to much larger ships following the completion of the Bayonne Bridge clearance project. The good news is that the port’s increased capacity will “reduce the unit cost for these containers coming into the port, so companies like Amazon will look at locations near the port for distribution centers.”
Amazon is opening a $100 million, one-million-square-foot center on Staten Island that will allow them to move heavy containers from the ports to the center.
“I think the areas near the port will be able to benefit from these larger ships coming into the port,” Spahn says.
Warehouse space continues to be at a premium in New Jersey, and many are coming in 40-50 percent preleased, says James Morris, administrative vice president, Commercial Real Estate/Group Manager, M&T Bank.
“It feels like in the industrial space, the players are all well-capitalized, have good institutional money behind them, solid sponsorship, have delivered in the past,” he says. “We certainly are active in it.”
Capital loosened about a year ago, but has returned to “more of an equilibrium,” Morris says. “We feel pretty good about capital and its activity in that space.”
Unlike the larger banks, small community banks are still focused on “growth within the community,” says Jeffrey Steigerwalt, vice president and commercial lender, Real Estate, ESSA Bank & Trust.
“We’ll stick with a loan a little bit longer, maybe do a little more on an LTV or LTC basis,” he says. “For more dollars, people don’t mind paying a little bit higher rate. We can manipulate and change our ways to fit what the customer needs until it gets to a certain point.”
Attendees at the RealShare New Jersey conference also heard from expert panels discussing unlocking value from multifamily properties; industrials and office assets. Stories summarizing those panels will appear in the next several days.