Mercury rising in red hot NJ investment sales market.
Following a record year of product trading hands in 2005, investors have continued to vie for quality office, industrial, retail and multifamily properties.
During the first half of 2006, 30 office sales transactions of more than 100,000 square feet closed. Valued at $1.7 billion and involving 11.6 million square feet, this activity mirrors the numbers reached at mid-year 2005, when 29 transactions valued at $1.7 billion had transacted.
"2005 finished with $2.9 billion in office sales over 100,000 square feet, which was an all-time record," said David Bernhaut, an executive vice president with the Metropolitan Area Capital Markets Group. "We are on pace to match or surpass this total in 2006, with plenty of capital in both the debt and equities markets keeping the investment sales market strong."
Bernhaut noted that trophy properties continue to be the most aggressively pursued office product type in New Jersey.
Year-to-date activity is highlighted by MackCali's half-billion dollar, 2.7 million-square-foot portfolio acquisition from The Gale Company and S.L. Green. In Mount Olive, BPG Properties purchased the 970,000-square-foot former BASF headquarters complex, while, in Newark, C&K Properties acquired the 758,201-square-foot 2 Gateway Center from American Landmark Properties.
In the industrial sector, mid-year investment sales activity rested at nearly 8.0 million square feet, consistent with totals recorded during 2005. The largest transaction occurred in Edison, where Seagis Property Group acquired a 985,000-square-foot warehouse/distribution facility at 2170 Lincoln Highway from Victoria Classics. In Teterboro, AMB sold a former Ford plant totaling 617,000 square feet, leased to Mohawk Distributors, to RREEF America REIT II Corp.
"The challenge with industrial is that there is limited product on the market in New Jersey," said Gary Gabriel, an executive director with the Metropolitan Area Capital Markets Group. "The properties that are changing hands are achieving record per-square-foot pricing and are trading at record low cap rates."
The same holds true for retail product, according to Andrew Merin, a Cushman & Wakefield vice chairman and head of the Metropolitan Area Capital Markets Group.
"Given the size of the New Jersey retail market, which is north of 200 million feet, there simply are not many properties coming available," he said.
"This has created extraordinary activity and record pricing for the properties that do change hands, and cap rates have stayed low for grocery-anchored retail and even power centers. When our team attended the ICSC conference in the spring, more than 45,000 attendees were present, which was the most ever and reflected the power of retail on a national basis."
New Jersey's multifamily investment sales market remained very active during the first six months of 2006.
"We have seen significant movement among institutional investors, who have come to recognize the state's economic stability and strategic location as an excellent long-term play for portfolio diversification," according to Jose Cruz, senior director of Cushman & Wakefield's Metropolitan Area Capital Markets Group.
Looking ahead, the Metropolitan Area Capital Markets Group anticipates a continuation of the positive investment sales trends that defined the first half of 2006. "Changing interest rates have not impacted investment activity in the New Jersey market, and cap rates have remained steady," Merin said.
"The bottom line is that New Jersey's strong corporate population and unparalleled real estate infrastructure provide an incredible landscape for investors.
"Today's most active players are maintaining a high, unabated demand here, which has put us on course for another year of remarkable performance."